The Bank of Israel lost NIS 5.3 billion on its foreign currency holdings, thanks to the appreciation of the shekel against the dollar. The losses are “paper losses,” reflecting the lower value of the dollars the Bank holds in reserve. The figures were released as part of the Bank’s annual activity report, issued last week.
That figure crossed the $100 billion mark last February, an all-time high for the Bank in dollar holdings. The reason the Bank has so many dollars, ironically, is because it has purchased so many dollars in order to keep the value of the shekel lower against the American currency. It is that policy that has caused the Bank to reflect losses in its dollar holdings. However, the losses will not be practical if and until it tries to sell those dollars. At the end of 2016, the Bank had $98.4 billion in reserve.
Also contributing to the lower value of the Bank’s holdings was the appreciation of the shekel against the euro, which has been even more dramatic than its appreciation against the dollar – but has less of an impact, since the Bank’s main foreign currency holding is in dollars. In 2016, the dollar fell 1.5 percent against the shekel, while the euro fell 4.8 percent. Against the British pound, the shekel rose 18.3 percent, representing that currency’s weakness in light of the U.K.’s upcoming exit from its commitments to the European Union.