Shekels money 370.
(photo credit: Ariel Jerozolimski/Bloomberg)
The shekel remained strong on Tuesday even though the Bank of Israel bought
dollars in a bid to weaken the shekel after the currency rallied to an 18- month
high. It was the central bank’s second intervention in a month.
shekel was little changed against the dollar and traded at 3.5876 as of 5:30
p.m. in Tel Aviv, versus 3.5884 on Monday, according to data compiled by
The Bank of Israel bought an estimated $135 million and is
“likely to buy more,” said Tom Gerszbejn, a currency trader at Union Bank of
Israel Ltd. in Tel Aviv.
Rony Gitlin, head of spot trading for Bank Leumi
Le- Israel, also confirmed the action.
“The surprise effect of
intervention is not so much there anymore, and thus the central bank will need
to make larger purchases to further weaken the currency,” Gitlin said. “We are
still seeing foreign banks [on Tuesday] buying the shekel as the country’s
economic fundamentals are supportive of appreciation.”
On April 8, the
bank intervened in the foreign-exchange market for the first time in nearly two
years, purchasing $100 million in the market after the shekel dipped below 3.6
to the dollar. On Monday, the shekel closed at 3.59, and it fell as far as 3.57
during trading on Tuesday.
A strong shekel negatively impacts Israel’s
exporters by making their products more expensive on the world market. From
January to March, exports (excluding diamonds, ships and aircraft) dropped at an
annualized rate of 7.7 percent, which followed a drop of 14.2% in the previous
three months, according to data the Central Bureau of Statistics released
The shekel has surged 8.4% over the past six months, making it
the best performer among 31 major currencies tracked by Bloomberg. The base
lending rate at 1.75% isn’t low enough to stop capital inflow affecting the
exchange rate, Bank of Israel Governor Stanley Fischer said Monday. Speaking in
a Knesset hearing on housing prices, he said the interest rate, the central
bank’s primary policy tool, affects housing, inflation and the exchange rate
“The interest rate in Israel, though relatively low, isn’t
low enough to keep out the foreign investors, who want to take advantage of the
fact that the interest in Israel is higher than the 1.5 percent abroad and thus
revalues the exchange rate,” Fischer said.
FXCM Israel, a foreign-exchange
company, said the dollar’s weakening around the world contributed to the problem
of a strong shekel. Whereas the first intervention was designed to ward off
speculators, it apparently failed to do so, meaning that future interventions
would require greater levels of dollar purchases, it said.
media coverage, the last intervention by the bank did not bring about a change
in the dollar- shekel trade, and the downward trend remains intact,” FXCM Israel
In brighter economic news, the unemployment rate fell from 6.6% in
February to 6.5% in March. The drop was accompanied by a decline in the labor
participation rate from 64.1% to 63.5%, meaning that the lower unemployment
figure may simply reflect fewer people looking for work.
contributed to this report.