Bank of Israel Eases Off Forex Buys

The Bank of Israel headquarters in Yerushalayim. (Ester Inbar)

At the end of last year’s record-breaking purchases of foreign currency, the Bank of Israel eased off as the shekel was only moderately affected, Globes said on Thursday.

The BoI bought $30 billion in foreign currency in the first 10 months of 2021, $4 billion in November, but only $739 million in December.

The purchases, which were aimed at weakening the shekel, did not succeed, as it strengthened 3% against the dollar in 2021, 10% against the euro and 9.4% against the Japanese yen. Arguably, the numbers would have been different had the bank not intervened.

Israel’s foreign exchange reserves climbed to a record $213 billion at the end of 2021, according to the BoI.

“The shekel was strengthened by the current account surplus, to a large extent due to the rise in exports of tech services, and this is expected to continue,” Globes said, adding that the rise in overseas stock markets and the need of Israeli institutional investors to hedge their overseas investments by buying shekels and selling foreign currency, have also contributed to the current situation.

On Thursday, however, the shekel was slightly down. In afternoon inter-bank, the shekel exchange rate was at NIS 3.112/$ and down 0.60% against the euro at NIS 3.519/€.

In the Bank of Israel interest rate meeting earlier this week, in which the interest rate was left unchanged at its historic low of 0.1%, the Monetary Committee stressed that due to the lower inflationary environment in Israel, the rate would remain at 0.1% or 0.25%, through until the end of 2022.

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