Governor of the Bank of Israel Prof. Stanley Fischer gave "The Wall Street Journal" a special interview yesterday, in which he defended his dollar purchasing policy to prevent the appreciation of the shekel. Fischer's foreign exchange interventions are among the most aggressive in the world today.
Fischer said, "When we consider the value of the currency we look at an index, a trade-weighted index. When we consider the value or exchange rate of the shekel, we don't look only at the rate vis-a-vis the dollar. We look at a basket of currencies of countries with which we trade. That's been much more stable than the dollar-shekel exchange rate."
Fischer explained, "Frequently, the main thing moving the dollar is the dollar-euro rate. That's the big moving variable in the external world at the moment. The euro is $1.40 one day, and $1.20 a few weeks before, and it went up to $1.60 not so long ago. These are huge changes. Then these move the shekel-dollar rate around because we generally move between the two. If the dollar is strengthening vis-à-vis the euro, then we weaken vis-à-vis the dollar and strengthen vis-à-vis the euro. So on average, we're more stable against the basket of currencies than against the dollar exchange rate."
Correspondent Charles Levinson asked, "As you said, the dollar is weakening globally, and yet you're still clearly fighting to keep the shekel down. At what point do you throw in the towel and say you can't really affect rate trends like you want to?"
Fischer replied, "It's not true that you can't really affect the trend. I have no doubt that the massive purchases we made between July 2008 and into 2010, especially for the first year when we were buying $100 million a day, 20 working days in an average month, we were buying over $2 billion a month for over a year, that that had a serious effect on the exchange rate which I think is part of the reason that we succeeded in having a relatively short recession."
Published by Globes [online], Israel business news - www.globes-online.com - on October 20, 2010
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