The Bank of Israel on Thursday intervened in the foreign-exchange market, reportedly buying up more than $250 million in reserves, in an attempt to weaken the strengthening shekel, which has been trading below 3.5 to the dollar in recent weeks.
In the morning hours of foreign-exchange trading, the rate jumped from 3.44 to 3.48 within three minutes. It closed at 3.486.
According to Tal Zohar, CEO of FXCM traders, the intervention was likely the first of a series designed to get the shekel solidly above 3.5 again.
The strong shekel has been a thorn in the side of Israeli exporters, who represent a significant portion of the economy as a whole.
Though the policy of intervening in the foreign-currency market was common under former governor Stanley Fischer’s tenure, this is the first time Governor Karnit Flug has taken such steps.
Former deputy governor Zvi Eckstein has publicly expressed support for an exchange-rate floor.
“According to my analysis, there is room for setting a shekel-dollar exchange rate floor at NIS 3.30 to NIS 3.40 per dollar,” he told Globes in an interview. “The exchange-rate floor must be part of a Bank of Israel strategy for supporting the second objective: support for growth and jobs under the constraints of the inflation target.”Globes contributed to this report.