Will the collapse of the shekel be stopped? Dr. Golan Benita, Director of the Bank of Israel's Markets Department, explained today (Monday) at a press briefing of the Bank of Israel the move announced by the Bank this morning—a foreign exchange intervention program in which it will sell up to $30 billion. As of 15:20 p.m., the dollar was at 3.93.
"Israel's economy is robust and stable and knew how to recover from difficult periods in the past, and we have no doubt that this will be the case this time as well. We at the Bank of Israel will use all the tools at our disposal to moderate the effects of the security crisis. This morning we activated the foreign exchange program and will continue to operate in the market for as long as necessary."
The IDF Spokesperson's Office said in a statement: "We are in control of the surrounding communities - we have switched to powerful waves of attack, we will reach thousands of targets with terrorists."
"In general, we have been conducting regular assessments of all aspects derived from the security situation since it began," he said. We are in the middle of a security event that also has economic effects, including on the markets—we see that the markets are volatile, the shekel is depreciated.
"The Bank will act in the near future as much as necessary in order to moderate the depreciation of the shekel, and the emphasis is on moderating and not creating any particular rate and providing the liquidity required for the continued orderly activity of the markets."
Benita emphasized that "the level of the State of Israel's reserves is high by any measure, even by international comparison, and one of the goals of the foreign exchange reserves is to enable proper activity in the markets in emergency situations, such as the situation we are in today. There were those who criticized the high level of the reserves, but today they understand that this level allows the Bank of Israel space to act and support the Israeli economy during the emergency period."
Is this program successful?
"We don't measure the success of the program at intervals of a few hours, but rather measure over time. However, the initial effect for the program seems to be positive. Given the unprecedented security event we are in, the dollar exchange rate hovered around the level of NIS 3.92 with relatively low volatility, before the program was activated, in preliminary trading in Asia the dollar had already kissed NIS 4. The plan also has a positive effect on the rest of the markets, and it seems that since this morning there has been relative stability in the equity market in the bond market."
Benita explained why the central bank has not intervened in the foreign exchange market to date, despite the sharp depreciation of the shekel against the background of the promotion of legal legislation without broad consensus. "Since the beginning of the year, we have seen a surplus depreciation of more than 10% due to political uncertainty. We did not see fit to intervene in the foreign exchange market because we understood that the market was in fact repricing Israel's risk premium, and this was reflected in the exchange rate."
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