Negligible Bank of Israel foreign currency sales in November

The Bank of Israel reports that it sold only $300 million in foreign currency in November. In October the Bank of Israel sold $8.2 billion in foreign currency, after announcing a program to sell up to $30 billion in foreign exchange to strengthen the shekel after the Israel-Hamas war broke out.

Israel’s foreign exchange reserves at the end of November 2023 stood at $198.169 billion, an increase of $6.934 billion from their level at the end of October after a revaluation of the reserves upwards by $7.261 billion, offset by the sale of $338 million in foreign currency and $70 million in government transfers abroad.

Thus the Bank of Israel has not even sold one third of the $30 billion in its plan and yet the shekel strengthened by 9% in November and is currently trading around the NIS 3.70/$ level, considerably stronger than on the eve of October 7.

It should be stressed that the Bank of Israel’s aim in introducing the plan to sell foreign currency was not to strengthen the shekel but to prevent a major depreciation. Even though the bank has not sold major amounts of its foreign exchange reserves, just the announcement of the plan added to the stabilization of the shekel.

The Bank of Israel also said it would provide liquidity to the market through SWAP mechanisms in the market of up to $15 billion. No use of this mechanism was made at all in November, after minimal use in October.

The sale of foreign currency reserves since the outbreak of the war is the first time the Bank of Israel has sold foreign currency since its floating exchange rate policy was introduced in 2000.

The Bank of Israel has yet to announce the end of its foreign currency selling plan but the negligible amount of foreign currency sold in November combined with the strengthening of the shekel makes it likely that the plan will end and the Bank of Israel will set about stimulating growth in the economy, and in particular starting to cut the interest rate.

Published by Globes, Israel business news – en.globes.co.il – on December 7, 2023.

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