Fischer: BOI intervened to 'anchor' shekel

The Bank of Israel intervened in the foreign exchange market, buying an undisclosed sum of foreign currency.

stanley fischer 88 224 (photo credit: Ariel Jerozolimski)
stanley fischer 88 224
(photo credit: Ariel Jerozolimski)
Last week's intervention into the foreign exchange market was a necessary and a "successful" move to "anchor" the shekel, Bank of Israel Governor Stanley Fischer said Sunday. "Over the last three days of last week, we saw something new - a very rapid appreciation of the shekel against other currencies, including currencies of developed countries that had appreciated the most against the dollar," he said at a press conference in Jerusalem. "We witnessed an unanchored foreign currency market and therefore decided"? Last week, the Bank of Israel intervened in the foreign exchange market for the first time since 1997, buying an undisclosed sum of foreign currency on Thursday and Friday as the shekel-dollar exchange rate fell to an 11-year low of NIS 3.35 in early trading on Thursday. Following the central bank's interventionist move on Thursday afternoon, the dollar strengthened slightly, trading at NIS 3.43. Speculations in the market estimated that the central bank probably bought between $300 million and $500m. in foreign currency over the course of two days. The Bank of Israel would provide details at the end of the month about the amount of dollars it had purchased, Fischer said. The intervention in the foreign exchange market was not indicative of any monetary policy change, he said, but rather an act meant to maintain the government's price stability target of between 1 percent and 3%, and encourage economic growth and employment in the economy. "It is not our goal to intervene to fix or keep a certain exchange rate," Fischer said. "We did not expect to intervene in the foreign currency market last week. We will continue to rely on market forces under extraordinary circumstances in a global financial crisis, and we hope intervention will be rare. But I have said before that a banker never says 'never.'" Until December, "we were seeing a weakening of the dollar and not a strengthening of the shekel," Fischer said. "In recent months, we began to witness a strengthening of the shekel against all other currencies," he said. "This was natural, because when compared with other economies of fairly developed countries, our situation was good. But over the past days we began to see a herd behavior in the market that required an intervention to halt the rapid appreciation of the shekel and bring back stability to the market." This was currently a very hard time of instability and uncertainty in the global market, which was impacting the Israeli market, Fischer said. "Over the past months, the global economy is going through a very difficult period, mainly as a result of the financial subprime mortgage crisis in the United States, and the repercussions this crisis is having on economic growth in the US and other countries in the world," he said. "The repercussions are also felt in the continuous decline of the value of the dollar against the basket of currencies around the world. "Over time, the value of the shekel will continue to rise as we continue to support growth while keeping price stability. Therefore every exporter must be prepared for this situation while taking into account that competition around the world will get fiercer," Fischer said.