The Bank of Israel has intervened aggressively to bring the surging shekel under control, buying approximately $400 million in foreign currency on Wednesday after a $75 million purchase on Tuesday, Globes reported.
The bank’s action was precipitated by a strengthening of more than 2% against the dollar in the wake of a decision on Monday by the BOI Monetary Committee headed by Governor Dr. Karnit Flug to leave the May interest rate unchanged at 0.1%.
The shekel-dollar exchange rate was at NIS 3.8563/$ on Wednesday afternoon, and was up 0.18% against the euro at NIS 4.62/€.
On Tuesday, the exchange rate was NIS 3.894/$, down 0.941% on Monday’s rate, and set the shekel-euro representative exchange rate at NIS 4.254/€, down 0.127%.
According to FXCM, Israel’s research department, “The shekel-dollar exchange rate continues its freefall and over the past 24 hours has even fallen below the key NIS 3.85/$ level. In effect, the breakthrough below the NIS 3.90/$ threshold on Monday — a level with major technical significance — gave a green light for a wave of selling, and the shekel-dollar exchange rate thus accelerated downwards.
“Even though the long-term trend for the exchange rate is for a rise, in the short term the momentum is with short traders, and long traders will prefer rejoining the game when at lower-trading exchange rates.
“The next target is NIS 3.82-3.84/$, the low-point of February and March, and it is reasonable to assume that there we will see a little more demand that may stabilize the shekel-dollar exchange rate.”