Shekel Nears Range That Will Draw Central Bank Intervention
(Bloomberg) -- Israel’s currency could be on the cusp of prompting bigger central bank interventions after appreciating toward the upper bound of the range policy makers consider appropriate.
The shekel trades near a record set in August against a basket of currencies monitored by the Bank of Israel and has been among the best performers versus the dollar this year. Driving its strength is a current-account surplus and steady foreign direct investment into Israel’s technology sector.
The Bank of Israel slowed down foreign currency purchases last month after boosting reserves by some $30 billion since Israel went into its first lockdown in March. But it may return if the shekel’s appreciation continues, according to Deputy Governor Andrew Abir.
The shekel is “bouncing around the edge of our window,” Abir said in a phone interview on Monday. “We continue to monitor it and, if necessary, we’ll intervene.”
Keeping the shekel in check is key for policy makers who want to enhance the competitiveness of Israeli exports, which account for about a third of the economy. Annual inflation has been negative for six straight months as the shekel has depressed the cost of imports.
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