BoI medicine works: Shekel continues to weaken against dollar

The shekel-dollar exchange rate has risen by over 2% in three days.

The shekel continued to weaken against the dollar in inter-bank trading today, following the Bank of Israel's announcement of an extraordinary mid-month interest rate cut on Monday. The shekel-dollar exchange rate has risen 0.26%, compared with Tuesday's representative rate, to NIS 3.648/$; the shekel-euro exchange rate has fallen 0.82% to NIS 4.690/€. The shekel-dollar exchange rate has risen by over 2% in three days.

In international markets, the euro has weakened 0.2% against the dollar to $1.2864/€, the pound has weakened 0.15% to $1.5211/£, and the yen has weakened 0.2% to ¥101.41/$.

On Monday, the Bank of Israel unexpectedly announced a 25-basis point cut in the interest rate to 1.5%, which will come into effect on Friday, and it also announced a new foreign currency purchase plan to offset the effect of gas flow from the Tamar field, which has caused the shekel to strengthen against the dollar.

The Bank of Israel will buy $2.1 billion in dollars through the end of 2013, and will continue buying dollars for several years. The purchases, amounting to billions of dollars, will not be fixed, but will be based on the Bank of Israel's assessments of the effect of gas flows from Tamar. Although the dollars bought will become part of Israel's foreign currency reserves, they will be managed separately, with a longer horizon, and will not replace random interventions by the Bank of Israel in the foreign currency market.

Published by Globes [online], Israel business news - - on May 16, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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