Money Shekels bills 58.
(photo credit: Courtesy)
The Bank of Israel on Thursday published an amendment to the Liquidity
Directives, requiring banks in Israel to meet a reserve requirement for foreign
exchange derivative transactions by nonresidents.
The new order comes a
day after it published an order requiring full details of foreign currency swap
and forward transactions of more than $10 million in a day.
will come into effect on January 27. The amendment will impose a 10 percent
reserve requirement on shekel/foreign exchange swap transactions and forward
In other words, banks will have to set aside a larger
amount of capital against credit they offer nonresidents for foreign exchange
transactions, which will raise the cost of these deals to nonresidents, in an
effort to drive them from the market.
A senior Bank of Israel official
said, “It is brutal intervention. We won’t let the oligarchs buys shekels on
Sunday and sell them on Thursday to make a fast buck on the
“This is the start of taxation on the foreign currency market.
Some foreigners began buying dollars yesterday, but they didn’t really
understand what the Bank of Israel wants.
Today, they are making more
massive purchases, ” a foreign currency market trader told Globes.
press release, the Bank of Israel, led by Governor of the Bank of Israel Prof.
Stanley Fischer, said, “In the last few months, the volume of foreign exchange
derivative transactions by nonresidents has increased markedly. A significant
part of the increase in nonresidents’ transactions is in short term
This measure will strengthen the Bank of Israel’s ability to
achieve the objectives of its monetary, foreign exchange and financial stability
The market response to the press release was swift. The
representative shekel-dollar exchange rate rose 1.55 percent to NIS 3.599/$, and
the shekel-euro exchange rate rose 1.83% to NIS 4.8587/euro. In international
markets, the dollar continues to weaken against the euro and the pound,
suggesting that the weakening of the shekel was directly due to the new Bank of