On Monday, The Bank of Israel said that it will sell up to $30 billion in foreign currency on the open market, the central bank's first-ever sale of foreign currency, in order to preserve calm in Gaza amid the conflict with Palestinian terrorists. Following the news, the shekel plunged 2.8% against the dollar to 3.95, …
On Monday, The Bank of Israel said that it will sell up to $30 billion in foreign currency on the open market, the central bank’s first-ever sale of foreign currency, in order to preserve calm in Gaza amid the conflict with Palestinian terrorists. Following the news, the shekel plunged 2.8% against the dollar to 3.95, its lowest level since February 2016 and matching its largest one-day drop since March 2020.
“We are in an unprecedented security situation, and our estimate was that the market could get to a point of divergence without the announcement of our intervention,” Golan Benita, head of the Bank of Israel’s markets department, said during a press conference.
On the heels of what is projected to be a lengthy battle with Hamas in Gaza, the shekel has already depreciated by 10% so far in 2023, to a rate of 3.86 per dollar. According to Benita, the currency rate surged to as high as 4.3 shekels per dollar overnight in Asia before to the start of trade.
“Therefore, it was important for us before the opening of trade in the local market to increase the certainty in the market or decrease the uncertainty in the market, in order to moderate as much as possible incidents of overreactions, and ensure the markets’ regular activity,” he went on to say.
Benita stated that there are no intentions to sell more than $30 billion in FX at this moment, and that the large level of reserves allows the central bank to help the economy in times of need. “At this point, the central bank’s priority is simply to ensure that markets function normally,” said Murat Toprak, CEEMEA FX strategist at HSBC.
The central bank also stated that it will supply up to $15 billion in liquidity in the market through swap arrangements.
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