Shekel gains sharply after BoI intervention

Shekel Photo: ASAP Creative
Shekel Photo: ASAP Creative

The Bank of Israel's plan to lend Israeli institutions up to $15 billion from foreign exchange reserves has boosted the shekel.

The shekel is strengthening today against the dollar and against the euro. In early afternoon inter-bank trading the shekel-dollar exchange rate was down 3.61% at NIS 3.689/$ and down 4.96% against the euro at NIS 3.987/€.

Yesterday, the Bank of Israel set the shekel-dollar representative rate 0.906% lower than Tuesday's rate, at NIS 3.827/$, and the representative shekel-euro rate was set 1.227% lower, at NIS 4.195/€.

The Israeli currency's remarkable slide since the coronavirus pandemic took a grip on the country earlier this month has been halted by the Bank of Israel, which said yesterday that it will provide up to $15 billion in liquidity to the banks from its $130 billion foreign exchange reserves. Expanding this program will relieve the shortage of dollars created in the banking system in recent days, a shortage that has pushed the shekel-dollar exchange rate up from NIS 3.43/$ to NIS 3.87/$ earlier this week.

The foreign currency crunch in the banking system has been created by "margin calls" - demands from the banks and financial institutions to increase their collateral for overseas positions - and by purchases of dollars by financial institutions forced to reduce their foreign currency hedges on overseas investments in derivatives, following a steep decline in the value of these investments.

Meanwhile global ratings agency S&P sees the depreciation of the shekel as a positive development that could help Israel avoid a recession by strengthening the value of exports.

Published by Globes, Israel business news - en.globes.co.il - on March 19, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Shekel Photo: ASAP Creative
Shekel Photo: ASAP Creative
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018