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Bank of Israel to stop buying dollars on Nov. 12
Bank of Israel to stop buying dollars on Nov. 12The Bank of Israel will apparently stop soaking up foreign currency on November 12.
Published 9.2.08, 10:40AM
On March 24 of this year, the central bank started a program ostensibly designed to beef up Israel's foreign currency reserves. It began by buying $25 million on each business day, roughly speaking. On July 10, as the shekel refused to weaken against the dollar to the dismay of the manufacturing community, the Bank of Israel accelerated its moves and started buying an average of $100 million worth of dollars a day. That figure of $100 million a day in dollar purchases doesn't include Friday, when the Bank of Israel's buying drops to about $50 million.
The central bank's stated motive is to increase Israel's foreign currency reserves by $10 billion, though market players think it has a second agenda - to support the dollar against the shekel. The might of the local currency had been hurting exporters and weighing on Israel's economic growth, which is intimately tied to the export sector.
On March 20, the day before the central bank's announcement of official intervention in the market, the dollar was trading at 3.39 shekels.
On July 10 the dollar had sunk to NIS 3.20, which is when the central bank stepped up its pace of acquisitions. Today the dollar has rebounded to trade at about NIS 3.60.
As for that date of November 12 - so far the Bank of Israel has bought about $5 billion. It therefore has $5 billion left to buy in order to meet its stated target of increasing Israel's foreign currency reserves by $10 billion. (In July alone the Bank of Israel bought $1.9 billion.)
In early August the deputy governor, Zvi Eckstein, told TheMarker that after the central bank buys $10 billion, it will stop intervening in the currency market. It should reach that point on November 12 at its present pace of purchasing. At that time, Israel's foreign currency reserves will have reached almost $39 billion.
Yesterday, by the way, the dollar appreciated by 0.7% against the shekel, rising to NIS 3.61.
Since the Bank of Israel increased its purchases to $100 million a day, the dollar has appreciated by 9.1% against the shekel.