The shekel plunged the most in almost a month on
Monday after the Bank of Israel said it may purchase more than $100
million a day in the foreign-exchange market in the event of what it
called "unusual movements."
shekel retreated as much as 1.5 percent to 3.8315 per dollar, its
lowest since July 8. It was at 3.7880 at 6:08 p.m. in Tel Aviv
earlier trading up as much as 1% at a seven-month high of 3.7387. The
currency fell as much as 2.3% versus the euro and was last at 5.4577.
"The Bank of Israel will act in the foreign-exchange market in
the event of unusual movements in the exchange rate that are
inconsistent with underlying economic conditions, or when conditions in
the foreign-exchange market are disorderly," the bank said Monday in an
"We're going to see a spike up in the shekel-dollar exchange,
with the shekel weakening in the immediate future as speculators react
to this announcement," Tal Avda, vice president of investments at Clal
Forex, a foreign-exchange broker in Herzliya
, said Monday. In the long
term, he said the move was "a useless attempt" to control the
dollar-shekel exchange rate, because the "major force that moves the
market is the value of the dollar in the global currency market."
The central bank started buying dollars in March
2008 and has since accumulated about $50 billion in foreign-currency
reserves. It has been buying $100m. a day since July of last year in an
effort to weaken the shekel and help prop up exports, hurt by a drop in
demand brought on by the global financial crisis.
The bank said last Monday it would end its program of buying
government bonds this Wednesday, as the economy shows signs of
recovery. Those purchases were aimed at helping to push down corporate
buying costs. Analysts had speculated that the bank's next move would be to cut or end foreign-currency purchases.