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March 14, 2008

Bank of Israel buys dollars

by Richard Kilner

Story link: Bank of Israel buys dollars

On Thursday the Israeli central bank intervened in the foreign currency markets to purchase dollars.

It is the first such move by the Bank of Israel for over a decade.

Governor Stanley Fischer’s decision has surprised analysts, after his comments earlier that such an act was unlikely, and only a market failure would cause it.

However, the central bank has refused to reveal precisely how many dollars it has actually bought, and has also refused to rule in or out future foreign currency market interventions.

In an extremely brief statement the bank released, it cited the shekel exchange rate’s extraordinary behaviour as the reason for the unexpected action.

Yesterday the shekel hit its lowest rate against the dollar (NIS 3.35) since 1997, which was also the year that the last foreign currency intervention by the Bank of Israel occurred.

Though impossible to ascertain precisely how many dollars were purchased, some estimates suggest it was around $100m.

Nor did the move catch only traders off-guard, surprising the Finance Ministry of Israel as well.

Recently the falling value of the US dollar has meant that the euro and yen are more important to the shekel.

 

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