Expert Slams Bank of Israel’s Push for Low Shekel

An Israeli flag flutters outside the Bank of Israel building in Yerushalayim. (Ronen Zvulun/Reuters/File)

To stabilize the strengthening shekel, the Bank of Israel on Wednesday purchased $400 million — one of its biggest one-day purchases ever. The purchases caused a 0.3 percent increase in the value of the dollar versus the shekel, which closed at NIS 3.778/dollar on Wednesday. The euro closed at NIS 4.048.

The dollar has experienced its worst January in 30 years, amid speculation that President Trump would take specific steps to weaken the dollar. According to President Trump, other countries, including China and Germany, had manipulated their currency, weakening them so they could more easily export to the United States.

The dollar gained worldwide Tuesday on reports of strong performance of the American economy almost everywhere — except in Israel, where it continued to fall against the shekel. Speaking to TheMarker, Yossi Frank of Energy Finance said that the shekel’s strengthening in recent days was due to the action of speculators, who are banking on an interest rate rise by the Bank of Israel. As evidence, he pointed to the dollar’s behavior last Friday, when it continued to fall against the shekel — despite the fact that trading is very limited in Israel on Fridays.

The Bank of Israel seeks to keep the value of the shekel lower in order to assist exporters, as too strong a shekel makes Israeli products and services abroad more expensive. Commenting on that, Barry Taff, a former member of the Monetary Policy Committee of the Bank, said that the intervention of the BOI amounted to “a free subsidy for exporters. I believe we have to rethink the policy. It should be used only for short-term actions, and not as an ongoing policy.”