Bank of Israel to invest foreign reserves abroad

Market operations director Barry Topf told "Bloomberg" investments would be in the largest, and most liquid markets.

The Bank of Israel plans to start investing some of its foreign currency reserves in equities abroad by the end of the year, director of market operations Barry Topf told "Bloomberg". He added that the pilot investment would be through index trackers rather than specific stocks, and that investments would be made in the largest, most liquid and sophisticated markets through outside asset managers who havent yet been chosen.

We can achieve a higher return on the reserves without incurring higher risks, Topf said. Its been an extremely difficult environment for investors in general, and especially central banks because their natural environment has been government bonds and fixed-income investments and we know that yields are at historic lows."

Topf added, This is something which would have been virtually unthought of 10 years ago for a central bank. It has become more accepted because central banks have grown in sophistication."

Commenting on Israel's $76.8 billion in foreign currency reserves, Topf said, Theyve increased a lot, we think thats a good thing. The level of reserves is broadly consistent with what we need. That also allows us to be flexible in terms of intervention policy. We dont have a need to go out and buy reserves but we also dont have a need to go out and sell."

Topf said that the Bank of Israels goal was to return to a situation in which it doesnt intervene in the market, but that didnt mean that it would not intervene if the exchange rate diverges markedly from underlying fundamentals.

Published by Globes [online], Israel business news - www.globes-online.com - on June 16, 2011

Copyright of Globes Publisher Itonut (1983) Ltd. 2011

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