Pressure Mounts on Bank of Israel to Rein in Shekel

YERUSHALAYIM

The Bank of Israel is coming under mounting pressure from exporters, manufacturers and some within the financial system to intervene resolutely to stabilize the dollar/shekel exchange rate.

“The Bank of Israel’s policy regarding the dollar has been relatively successful until today, but must be considered anew and adapted to the new circumstances,” a senior financial source Globes after the psychological threshold of NIS 3.5/$ was crossed recently.

The BOI has veered from former Governor Stanley Fischer’s policy of selective intervention at volatile junctures. It is not buying dollars, and a decision a few days ago to allow interest rates to remain unchanged touched off another surge of the shekel.

Setting a fixed exchange rate is one of the bolder fixes being considered. According to the source, “This is a dangerous process, because it does not allow for its results to be blurred, and it puts the Bank of Israel’s reputation and credibility on the line.”

Such a drastic measure would require wall-to-wall support, he cautioned.

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