BoI intervenes to halt shekel appreciation

Shekel Photo: ASAP Creative

Bank Leumi: If the Bank of Israel continues to intervene then the undeclared target rate is likely to be just under NIS 3.20/$.

The shekel continued strengthening this morning and at one point reached NIS 3.11/$. But after, according to market sources, the Bank of Israel intervened and purchased foreign currency, the shekel weakened slightly and in afternoon inter-bank trading, the rate is 0.17% down from yesterday at NIS 3.129/$. The euro is slightly strengthening against the shekel and is currently up 0.11% at NIS 3.631/€. The Bank of Israel declined to comment on the matter.

Yesterday, the Bank of Israel set the representative shekel-dollar rate down 0.760% from Friday, at NIS 3.134/$, and the representative shekel-euro rate was set 1.595% lower at NIS 3.627.

The shekel is at its strongest against the dollar in nearly 11 months (and very close to its strongest in 25 years) and its strongest against the euro in more than 20 years. The shekel has hit a new peak against the Bank of Israel's nominal effective rate, which measures the shekel against the basket of currencies of Israel's major trading partners.

Bank Leumi chief economist Gil Bufman and Leumi Capital Partners head of market strategy Kobi Levi said, "If the Bank of Israel again intervenes in the market either through words or actual purchases, at a timing of its own choice, then it would seem that the undeclared target would be 'just under' NIS 3.20/$, in the absence of any major changes in the dollar on world markets.

"If the Bank of Israel very much surprises us and continues to stay completely out of the foreign currency market - something which would need explanation about a change in declared policy - then the way will be paved in the short term for an appreciation below NIS 3.10/$.

"In these circumstances, there would be in the continued appreciation of the shekel an affect in moderating the level in the rise of the consumer price index (CPI) (inflation) and it is also possible that as a result the date of the start of raising the interest rate will be postponed to a later stage towards the end of 2022, as was actually expressed in the most recent forecasts of the Bank of Israel Research Division.

The Manufacturers Association of Israel has called an emergency meeting for tomorrow to discuss the potentially disastrous effects on the shekel's appreciation for the country's exporters.

Published by Globes, Israel business news - en.globes.co.il - on November 2, 2021.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2021.

Shekel Photo: ASAP Creative
Shekel Photo: ASAP Creative
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