Jerusalem, 2 November, 2021 (TPS) — The Bank of Israel (BOI) today was forced to intervene when the US Dollar came very close to hitting a 25 year low. As it stands right now, the Dollar is at an 11 month low.
The BOI intervened to depreciate the Shekel by buying up foreign currencies. Simple supply and demand economics means that the Bank’s activity put more Shekels out in the market, thereby lowering its value. Before the move, the USD fell to just NIS 3.11, but by the end of the day, the BOI set the official exchange rate of NIS 3.13 to the USD. This still constituted a 0.128% drop for the Dollar against the Shekel.
In recent years, when the dollar fell against the Shekel, it was because it fell across the board against many world currencies. But the Shekel has been surging lately, gaining strength against many convertible currencies including the Euro. At the close of business today, the Euro was down 0.362% against the Shekel.
A strong Shekel is good for the Israeli consumer and tourists. It makes it cheaper to travel abroad as the Shekel gets more in local currencies. And since airfares and hotel rates are set in either Dollars or Euros, for the most part, when the Shekel rises it costs an Israeli fewer Shekels to buy the same item. This also makes foreign imports less expensive for the Israeli consumer.
But there is a downside that is harmful to Israel’s economy. The strong Shekel means foreign investors in Israeli startups get less for their money. Still hurts local growth. It also means less spending by foreign tourists since their Dollars and Euros do not go as far. And it also makes Israeli exports more expensive to foreign buyers.
This is why the Bank of Israel decided to intervene today. But it has not revealed to what extreme it is willing to go. The BOI has not set any red lines for the lowest point it will let the Dollar slip, or how much it is willing to buy up in foreign currencies.
And there is currently a concern in Israel over inflation. Prices are going up on everything. So the Bank will not want to put too many Shekels out on the market as this would cause even more increases in prices.
The following are the end of day exchange rates as set by the Bank of Israel for Tuesday, November 2, 2021:
(Units are given in the foreign currency and the rate is given in its value in NIS)
