"The Bank of Israel has gone back to buying dollars every day. It is trying to signal to the market that gambling against it is not worthwhile, but this method failed before, and is failing again now," Energy Finance CEO Yossi Frank told "Globes" today, commenting on the Bank of Israel's recent intervention in the foreign currency market.
"The Bank of Israel spent $1.5 billion in the most amateurish way possible. After two hours of activity, the market was back right where it was before the intervention. This is a very dangerous situation, in which the Bank of Israel is liable to lose its credibility. It mustn't allow this to happen," Frank declared.
"When the central bank loses its credibility, it's a very dangerous situation. Yaron can't accept what happened here in the past week. He has to draw conclusions and adopt different tactics that will really surprise the players and change the momentum. The Bank of Israel announced a number of times that it had other tools, but declarations aren't enough for the market; it isn't deterred by warnings."
Last week, Bank of Israel Monetary Committee member Andrew Abir said, "Intervention in the foreign currency market is the most appropriate way today of increasing inflation and boosting the Israeli economy… The use of the interest rate tool is limited, while in theory, purchasing dollars is unrestricted… we can buy as much as we want."
"Globes": But the Bank of Israel buys and publicizes its purchases.
Frank: I agree with this one thing. The most idiotic thing that the Bank of Israel did three years ago was to be secretive and warn the world and his wife that it would not say when it would intervene. I said at the time that this was completely foolish and did not serve the Bank of Israel's goals. So they have learned now, but they're still intervening on the same familiar format that they always used, without thinking, using technical analysis, intervention when nothing is going on, and so forth. It is easy to see that in comparison with the amount of purchases, the effect is completely negligible. The market is ignoring them, and that's the most dangerous thing."
What do you think that the Bank of Israel should do if it has already intervened in the market, even outside of trading hours, but the shekel reverted to its level before the intervention
"Except for last Wednesday, most of its intervention was during trading hours. Now, in order to avoid losing credibility, it has to bring the shekel-dollar exchange rate back to NIS 3.49/$ now. Only that will signal those who bet against it that it isn't worthwhile. This has to happen tonight."
Isn't that playing into the hands of the speculators who are just waiting for it?
"They're waiting for the way it makes the purchases, but if the Bank of Israel surprises them twice… three times, it will break through the points of resistance and cause a more substantial shekel depreciation. The speculators will think hard about whether they should wait in ambush. They're waiting because they think that the Bank of Israel is a weak player with little ammunition."
Published by Globes, Israel business news - en.globes.co.il - on December 4, 2019
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