Bank of Israel to sell US$30 billion of forex to stabilise shekel amid Gaza war
THE Bank of Israel said on Monday (Oct 9) it will sell up to US$30 billion of foreign currency in the open market, in the central bank’s first-ever sale of foreign exchange, to maintain stability during Israel’s war with Palestinian militants in Gaza.
The move appeared to quickly calm the market as the shekel recovered from steep early losses.
“The bank will operate in the market during the coming period in order to moderate volatility in the shekel exchange rate and to provide the necessary liquidity for the continued proper functioning of the markets,” it said.
The central bank also said it would provide liquidity through Swap mechanisms in the market of up to US$15 billion.
“The Bank of Israel will continue monitoring developments, tracking all the markets, and acting with the tools available to it as necessary,” it said.
The Israeli shekel was last trading 2 per cent lower at 3.9151 per US dollar. Earlier in the day, the shekel tumbled more than 3 per cent to an almost eight-year low of 3.9880 per US dollar.
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The shekel was already weak, down 10 per cent versus the US currency so far in 2023, largely due to the government’s judicial overhaul plan that has sharply curtailed foreign investment.
Israeli stock and bond prices slid 7 per cent and many businesses were closed on Sunday, a day after Hamas gunmen from Gaza killed 700 Israelis and abducted dozens more in the deadliest incursion into Israeli territory since Egypt and Syria’s attacks in the Yom Kippur war 50 years ago.
Israel has amassed forex reserves of more than US$200 billion, much of it from buying forex since 2008 to try and keep the shekel from strengthening too much and harm exporters as foreign inflows to the country’s tech sector soared.
The last time the bank intervened was in January 2022.
Last month, Bank of Israel governor Amir Yaron told Reuters that despite the sharply weaker shekel that has helped to push up inflation, there was no need to intervene since there were no market failures. REUTERS
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