Bank of Israel Buys Dollars as Shekel Climbs to 18-Month High

By David Wainer

The Bank of Israel bought U.S. dollars for the first time in almost two years in a bid to weaken the shekel after the currency rallied to an almost 18- month high, traders said. The shekel pared gains.

The central bank bought at least $100 million, said Moshe Nir, a trader at Mercantile Discount Bank Ltd. in Tel Aviv. Rony Gitlin, head of spot trading at Bank Leumi Le-Israel Ltd. in Tel Aviv, confirmed the purchases while declining to give an estimate on the amount. The Bank of Israel, which last intervened in July 2011, declined to comment when contacted by Bloomberg News.

“With the shekel at these levels the central bank felt that it had to step in,” Nir said. “It’s pretty significant given the bank’s absence from the market for so long.”

The shekel climbed as much as 1.1 percent to 3.5898 a dollar before trimming the advance to 0.3 percent at 3:02 p.m. in Tel Aviv. The currency has been gaining as gas production began, improving the current-account balance by as much as $3 billion this year, according to the central bank. Governor Stanley Fischer, who will step down at the end of June, is credited by some economists with helping the nation weather the world financial crisis by buying foreign currency to curb shekel strength and support exports.

The Israel Export Institute has urged the central bank to resume currency buying as exports, making up about 40 percent of the economy, fell by an annualized 6.5 percent in the fourth quarter. Economic growth eased to 2.4 percent, the slowest pace in more than three years.

To contact the reporter on this story: David Wainer in Tel Aviv at dwainer3@bloomberg.net

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