The Bank of Israel set the shekel-dollar representative rate down 0.83% from Wednesday's exchange rate at NIS 3.456/$ and set the shekel-euro rate down 0.18% at 4.251/€.
After the exchange rate was set the shekel began weakening in inter-bank trading and was up 0.25% against the dollar at NIS 3.465/$ and up 0.41% against the euro at 4.268/€.
Prico Risk Management and Investments CEO Yossi Fraiman has responded to the continued strengthening of the shekel against the dollar and euro. He said, "On Thursday and Friday no new representative rate was set by the Bank of Israel (due to the Purim holiday) and there were those who took advantage of that fact to sell large amounts of foreign currency, some of them speculators. On the one hand, there is a large supply of foreign currency while on the other hand the Bank of Israel has dramatically lowered the scale of its intervention. If the Bank of Israel won't buy $2-3 billion per month then there will be supply of foreign currency every month on a scale that there will be nobody in the market to absorb it."
He added, "As of now there is a market distortion and the Bank of Israel is aware of this. The dollar has strengthened above $1.21/€ and while strengthening worldwide it is weakening against the shekel, so there is clearly a distortion here with foreign players probably operating. The Bank of Israel will have to intervene consistently in trading otherwise we will return to the low-point of 2008 when the shekel-dollar rate fell to NIS 3.22/$."
"Various reports say that the Bank of Israel said at a meeting with foreign banks that it does not plan intervening in the foreign currency trading market on a significant scale and this persuaded the banks that the shekel was about to strengthen. We continue to estimate that a large foreign currency supply will bring about the continued strengthening of the shekel but the Bank of Israel is keeping its policy secret and wants to create uncertainty, not necessarily showing its cards and letting market forces swiftly push the exchange rate down."
"In our assessment," Fraiman concludes, "The Bank of Israel has increased its foreign currency reserves in relation to the GDP. It is clear that the Bank of Israel cannot change a global trend but it can intervene when there is a market distortion and it identifies interested parties."
Published by Globes [online], Israel business news - www.globes-online.com - on March 5, 2018
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