Reports as to the possible elimination of the exchange rate slant mechanism gave rise today (Tuesday), to a heavy supply of $150-200 million injected by the business sector. The Bank of Israel was forced to intervene throughout trading hours today, purchasing the entire supply.
According to bank sources, the Bank of Israel has purchased, since the beginning of the month, more than one billion dollars, in order to protect the limits of the fluctuation band. Corresponding, the Bank of Israel has had to absorb NIS 3.3 billion in money surpluses injected by it into the market, in an attempt to prevent the currency basket exchange rate from dipping below the slant band.
The dollar exchange rate today rose 0.39% to a new high of NIS 3.319. The devaluation of the shekel against the dollar is due to the strengthening of the American currency in world money markets. The currency basket exchange rate rose 0.02% to reach NIS 3.6253, due to the Bank of Israel’s intervention in trading. The currency basket exchange rate is at the floor of the fluctuation band, 6.9887% down from the mid-line.
It will be noted that since the beginning of the month, the shekel has been devalued by a cumulative rate of 2.1% against the dollar. The accelerated devaluation of the shekel against the dollar will result in an increase of housing prices and rent, and will contribute 0.5% to the price indices in January and February.