The strengthening dollar in global capital markets caused shekel devaluation today. The global gain in the dollar came after US Federal Reserve Chair Alan Greenspan spoke to the US Congress on the matter of the prime rate. The representative dollar exchange rate rose 0.4% today to NIS 3.297. This is the highest dollar exchange rate in 7.5 months. On May 30, 1996 the representative dollar stood at NIS 3.301.
The currency basket exchange rate rose 0.02% to NIS 3.6218, 6.9902% from the median range. The currency basket’s rise stemmed from Bank of Israel’s intervention in foreign currency trading.
Bank of Israel continued today to intervene in trading in order to support the currency basket exchange rate. According to banking establishment sources, Bank of Israel was forced to intervene today during the entire course of trading and acquire $50-60 million, a measure designed to stabilize the currency basket at the lower limit of the fluctuation range, about 7.05% from the median rate. Bank of Israel absorbed all surplus supply on the market today.
It should be noted that in the past two weeks, since renewing intervention in trading, Bank of Israel has purchased $400-425 million from the public in order to protect the slant mechanism regime. Bank of Israel has announced a number of times over the past few days that it will absorb all surplus supply on the market in order to support the currency basket.
Bank of Israel is expected in the coming days to renew demands that the Ministry of Finance raise the STL ceiling, in order to allow it to absorb surplus liquidity on the market. The surplus stems from large government injections in order to finance the budget deficit and from foreign currency acquisitions.