The New Israel Shekel (NIS) proved the naysayers wrong and did not plummet to even greater lows against the US Dollar due to the effects on Israel’s economy caused by the Iron Swords War against the Hamas terrorist organization in Gaza. In fact, the opposite has happened and, over the past week, the Shekel returned to almost its pre-war value.
The New Israel Shekel was in danger of crashing after the October 7 Hamas attacks. In the first three weeks of the war, it lost 6.5% of its value against the US Dollar and fell to an eight-year low below the four to the Dollar mark.
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But the Bank of Israel set the shekel’s official exchange rate against the Dollar at 3.866 (or one Shekel is worth about $0.26). On October 6 $1 was worth 3.8597 Shekels.
The Shekel dropped in the aftermath of the attack because of the damage it caused to Israel’s economy and the slowdown in the economy expected from the war.
It is costing Israel billions to fund the ongoing fighting, while at the same time it is losing millions in tax revenue as every day passes.
And the number of tourists visiting the country for the month of October dropped by 80% from the number in October 2022.
The strain on the economy coupled with the drop in the Shekel’s value forced the Bank of Israel to sell off some of its foreign currency reserves.
The Bank of Israel (BOI) reported that Israel’s foreign exchange reserves at the end of October 2023 stood at $191.235 billion, a decrease of $7.318 billion from their level at the end of the previous month.
The level of the reserves relative to GDP was 36.8 percent.
The Bank of Israel also released its first monthly report on programs it is operating in the financial markets in view of the war.
For example, it sold up to $30 billion of foreign currencies in order to “moderate the fluctuations” in the value of the shekel and to supply the liquidity required for the continued orderly activity of the markets.
