Bank of Israel to sell up to $30 billion of forex to stabilise shekel
By Steven Scheer and Ari Rabinovitch
JERUSALEM (Reuters) — The Bank of Israel said on Monday it will sell up to $30 billion of foreign currency in the open market, the central bank's first ever sale of foreign exchange, to maintain stability during the war with Palestinian militants in Gaza.
The shekel fell 2.2% versus the dollar to 3.924 — its lowest since a 2016 — after the announcement, then steadied.
«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 it would provide liquidity through SWAP mechanisms in the market of up to $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 shekel was already weak, down 10% against the U.S. currency so far in 2023, partly due to the government's judicial overhaul plan that has sharply curtailed foreign investment.
«Despite our expectation of a weaker Shekel in the medium term — softer tech equity flows, a more complex political background and more two-sided risks to monetary policy — we do not expect further sustained bouts of shekel weakness,» Citi economists said in a report.
Israeli stock and bond prices slid 7% on Sunday, a day after Hamas gunmen burst across the fence from Gaza in the deadliest incursion into Israeli territory since Egypt and Syria's attacks in the Yom Kippur war 50 years ago.
On Monday, key Tel Aviv share indices were down as much as another 0.3% in afternoon trading, while government bond prices fell as much as 1%.
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