Bank of Israel senior officials denied that the central bank had any specific target exchange rate at a seminar today on the foreign currency market organized by the.
An official said, "The Bank of Israel operates in the foreign currency market only in situations of exceptional volatility in the exchange rate that do not reflect substantial changes in the economic conditions, or situations when the foreign currency markets is not functioning properly or its is proven that that a market failure has been caused."
Only last Thursday the Bank of Israel intervened to buy $250 million after the shekel strengthened to around NIS 3.70/$. The Bank of Israel first began intervening in March 2008 and since then has not stopped purchasing dollars. Until August the bank bought $100 million daily, and since then purchases have been made sporadically, often on days such as last Thursday when there was no volatility on the market.
However, the Bank of Israel official stressed that there was no policy directed at specifically strengthening the dollar but rather the aim is to examine the overall exchange rate of the shekel against a basket of all the world's major currencies. He said, "The Israeli economy is not only influenced by the US economy. Each day we publish an exchange rate for the currency basket, which reflects the breakdown of Israel's foreign trade."
The official added, "Because the dollar has very much weakened over the past year vis-a-vis the basket of currencies, the rate of appreciation of the effective exchange rate of the shekel is lower than the appreciation of the shekel against just the dollar. In the six months ending September 30, 2009 the shekel appreciated 10.6% against the dollar and only 3.2% against the basket of currencies."
Bank of Israel officials expect that with the global economy stabilizing, the situation prevailing between 1998-2008 will soon return, when the Bank of Israel was not required to intervene.
Published by Globes [online], Israel business news - www.globes-online.com - on October 18, 2009
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