Shekel Defies Bank of Israel Intervention

Seven months after the Bank of Israel resumed purchasing foreign currency to weaken the shekel, the shekel remains strong, Globes reported on Wednesday.

The shekel continued to gain against the dollar, euro and other major currencies on Tuesday, even as the BoI nears its declared target of buying $30 billion in foreign currency for 2021.

The BoI set the representative shekel-dollar rate down 0.124% from Tuesday, at NIS 3.213/$, and the representative shekel-euro rate was set 0.384% lower, at NIS 3.809/€. This is the strongest that the shekel has been since the bank announced its purchasing program seven months ago.

Bank of Israel Governor Prof. Amir Yaron has said that the purchases will likely exceed $30 billion, but did not say how far the bank would be willing to go. In the first half of 2021, the BOI bought $25 billion of foreign currency.

“The strengthening of the shekel is influenced by the flow of capital into Israel, among other things, due to high-tech exits, and the consequent current account surplus is likely to continue through to next year,” explained Globes.

Regarding market reaction to the bank’s intervention, Energy Finance CEO Yossi Frank was highly critical, saying that “the market is looking for actions and if the shekel has strengthened 3% over the past two weeks for no reason and the Bank of Israel doesn’t react, then market traders are sure that these are idle threats.

“The dollar is very strong worldwide, and stock markets are virtually unchanged over the past two weeks, and the Bank of Israel has fallen asleep on its watch. There is a speculative attack here like there was at the start of January because the market believes that in contrast to what the Bank of Israel declares, it has run out of ammunition and so it’s possible to attack the shekel. There is nothing more dangerous in a currency market than a loss of credibility, and what you are seeing at the moment is exactly the result,” Frank said, according to Globes.