JERUSALEM (Reuters) – The Bank of Israel could buy more than $ 30 billion in foreign currency this year if that was necessary to maintain the strength of the sekel, Governor Amir Yaron said.
Yaron made the remarks at a closed event Sunday night. The comments were provided by the central bank on Monday.
Last month, the Bank of Israel said it planned to buy $ 30 billion in foreign currency this year after the shekel slammed a 24-year high against the dollar, making it one of the strongest currencies in the world. Officials at the time said he wanted to reassure the market about the intentions while also helping to protect exports.
Yaron said the amount was huge.
“To understand the size, consider what would happen in the foreign exchange market if the current account surplus decreased so significantly,” he said.
The shekel gained about 8% against the dollar in 2019, and another 8% last year despite buying a central bank foreign currency of $ 21 billion.
“Clearly, if relevant, and given the current economic and market situation, we will be able to increase the scope of the foreign exchange buying program, just as we have previously announced expansion. government bond quantitative easing plan, ”Yaron said.
Last year, the Bank of Israel first announced a plan to buy 50 billion pence ($ 15 billion) of government bonds but later boosted those to 85 billion shekels.
For now, the intervention plan has worked. The shekel has slipped 5% to 3.28 per dollar since the Bank of Israel was announced on January 14, with analysts believing that speculative flows have been largely feared off.
The central bank said Sunday it bought more than $ 6.8 billion in foreign currency in January.
Policymakers have attributed the strength of the shekel to the weak dollar, a current account surplus that extends from strong technology exports and lower imports last year amid the pandemic, a major foreign exchange. to Israeli high-tech companies, and higher foreign flows into Israeli government bonds.
Yet more pressure on the currency comes from hopes for a healthy home recovery thanks to the rapid rollout of COVID vaccines and more investment coming from normalization treaties dealing with Arab countries.
($ 1 = 3.2866 pence)
Narrated by Steven Scheer, Edited by William Maclean