In a rare move, the Bank of Israel announced on Tuesday that it has sold 8.2 billion dollars since the beginning of the war in Gaza to strengthen the shekel. The sale is part of a plan to sell 30 billion dollars that the bank announced last month. This is the first time that the central bank has sold dollars to stop devaluation since Israel switched to a floating exchange rate regime in the 1990s.
The decision to sell foreign currency is a highly unusual one. In the past, the Bank of Israel has bought dollars to prevent the shekel from becoming too strong, which can harm Israeli exports. The sale of dollars by central banks is also a rare step. One of the few recent examples was the Bank of Japan, which sold dollars to curb devaluation.
The Bank of Israel’s decision to sell dollars is a sign that it is concerned about the recent depreciation of the shekel. The shekel has lost over 10% of its value against the dollar since the beginning of the year. The war in Gaza has had a negative impact on economic activity, and inflation is rising. The sale of dollars is likely to help to mitigate some of these challenges by providing support to the shekel and boosting investor confidence.
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The Bank of Israel is selling the dollars through open market operations. This means that it is selling the dollars to banks and other financial institutions at market prices. The Bank of Israel has not announced a specific timetable for the sale, but has said that it will continue to sell dollars until it is satisfied that the shekel has stabilized. The Bank of Israel has also said that it will continue to monitor the foreign exchange market and take any necessary steps to maintain financial stability.
The sale is likely to have a number of positive effects on the Israeli economy, including stabilizing the shekel, boosting liquidity in the foreign exchange market, and sending a signal to investors that the Bank of Israel is committed to maintaining a stable exchange rate.
