As the stock markets fell and the shekel weakened last month, the Bank of Israel sharply reduced its intervention on the foreign exchange market to purchase foreign currency.
Last year the Bank of Israel purchased $35 billion in foreign currency to help exporters by moderating the strengthening of the shekel. For much of the year, the Bank of Israel bought an average of $5 billion in foreign currency per month. But with the shekel weakening, the Bank of Israel bought only $356 million in foreign currency in January, after buying $739 million in December 2021, the Bank of Israel reports.
Israel's foreign currency reserves fell $4.2 billion at the end of the month to $208.7 billion, representing 45.7% of GDP. The reduction in the reserves was due to a re-evaluation that decreased the reserves by $3.745 billion and private sector transfers of $2.161 billion. These were offset by government transfers of $1.303 billion.
The shekel weakened last month due to the falls on overseas stock markets, which compelled Israeli institutional investors to sell shekels and buy foreign currency to hedge their investments abroad.
Published by Globes, Israel business news - en.globes.co.il - on February 7, 2022.
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