The Bank of Israel purchased $801 million worth of foreign currency in May as part of its efforts to prevent excessive strengthening of the Israeli shekel against the U.S. dollar.
The central bank stated that the intervention was carried out to maintain the orderly functioning of financial markets amid continued appreciation of the shekel.
Key Highlights
- Foreign currency purchases in May: $801 million
- Purpose: Support market stability and moderate shekel strength
- Foreign exchange reserves increased by $3 billion
- Total reserves reached a new record high of $238.7 billion
Why It Matters
A stronger shekel can create challenges for Israel's export-oriented economy by making Israeli goods and services more expensive in international markets. It can also reduce the value of foreign earnings when converted back into local currency.
By purchasing foreign currency, the central bank increases demand for dollars and other currencies while adding supply of shekels, helping to reduce upward pressure on the local currency.
Market Impact
The move signals that the Bank of Israel remains willing to intervene in currency markets when exchange-rate movements become too sharp. The record level of foreign exchange reserves also provides the central bank with substantial firepower to manage future volatility if needed.
Despite the intervention, the shekel remains one of the stronger currencies in the region, supported by Israel's technology sector, capital inflows, and relatively resilient economic fundamentals.
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