Deputy Governor of the Bank of Israel Prof. Zvi Eckstein made it clear yesterday that if the extraordinary shekel strength continues, the central bank would continue to intervene in foreign currency to stabilize the market. "We do not have an interventionist policy. We intervened last week to stabilize the market when we saw a crisis was developing. We believe our move was a success," he said.
Prof. Eckstein also stressed that the Bank of Israel also needs to maintain a tight guard over inflation. "The Bank of Israel paid for the dollars in shekels. We need to avoid printing too many shekels, so that we don't end up with inflation," he warned.
Eckstein spoke, for the first time, about the considerations behind the bank's decision to intervene. "We intervened last week because the shekel had strengthened excessively against both the dollar and the euro throughout the week, and especially on Thursday afternoon. We could see the onset of a sales deluge (of dollars) and we intervened once the shekel appreciated by more than 3% against both currencies together."
Eckstein added that the Bank of Israel now hoped that trading would proceed normally, that there would not be a run on the shekel, and that its exchange rate would reflect market conditions, so that the bank could avoid intervening.
Published by Globes [online], Israel business news - www.globes-online.com - on March 18, 2008
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