Bank of Israel intervention on the foreign currency market is likely to remain negligible over the coming weeks as the Russia-Ukraine war weakens the shekel.
As the shekel weakens against the dollar, the Bank of Israel stopped purchasing foreign currency last month.
Israel’s foreign exchange reserves at the end of February 2022 stood at $ 207,065 billion, a decrease of $ 1,692 billion from their level at the end of the previous month, the Bank of Israel reports. The level of reserves relative to GDP at the end of February was 45.1%.
The Bank of Israel said that the decrease was the result of revaluation that decreased the reserves by about $ 1.108 billion and government transfers abroad totaling $ 838 million. The decrease was partly offset by private sector transfers of $ 254 million.
Last year the Bank of Israel purchased $ 35 billion in foreign currency to help exporters by moderating the strengthening of the shekel. For much of the year, the Bank of Israel bought an average of $ 5 billion in foreign currency per month. But with the shekel weakening due to expected US Federal Reserve rate hikes, the Bank of Israel bought only $ 356 million in foreign currency in January, after buying $ 739 million in December 2021.
In the past few weeks, the Russia-Ukraine war has further weakened the shekel as investors rush to the safe haven US dollar, so that Bank of Israel intervention on the foreign currency market is likely to remain negligible over the coming weeks.
Published by Globes, Israel business news – en.globes.co.il – on March 7, 2022.
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