Bank Of Israel To Sell $30 Billion Of Forex To Stabilise Shekel Amid War With Gaza

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The Bank of Israel said on Monday that it would sell up to $30 billion in foreign currency on the open market in order to ensure stability during Israel’s conflict with Palestinian terrorists in Gaza. This will be the first time the central bank has ever sold foreign currency.

The action seemed to swiftly calm the market as the shekel recovered from severe 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 in a statement.

The central bank also said that it would offer up to $15 billion in market liquidity via SWAP procedures.

“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 shekel had dropped more than 2% to a more than 7-1/2 year low of 3.92 per dollar prior to the announcement. The shekel is now trading at 3.86, down 0.6%.

Due mostly to the government’s aim to restructure the judiciary, which has significantly reduced foreign investment, the shekel was already weak, down 10% against the dollar so far in 2023.

Following the bloodiest incursion into Israeli territory since Egypt and Syria’s strikes during the Yom Kippur War 50 years ago, in which Hamas terrorists from Gaza killed 700 Israelis and kidnapped hundreds more, Israeli stock and bond prices fell by 7% on Sunday, and many companies were closed.

More than $200 billion in foreign exchange reserves have been accumulated by Israel, much of it as a result of purchases made since 2008 to attempt and prevent the shekel from overly strengthening and hurting exporters as foreign investment in the nation’s tech industry skyrocketed.

The bank’s most recent intervention was in January 2022.

Amir Yaron, the governor of the Bank of Israel, told Reuters last month that despite the sharply depreciated shekel, which has contributed to driving up inflation, there was no need for intervention because there were no market failures.