Bank of Israel steps up intervention to curb shekel appreciation

The US dollar was up against the shekel yesterday, against global trends. The rise probably stemmed from the intervention of the Bank of Israel which is trying to halt the sharp appreciation of the shekel in recent weeks and the risk posed to Israeli exporters.

The appreciation pressure on the currency is quite strong. USD-ILS had declined all the way to 3.73 in late April, while the EUR-ILS has been more stable this year. The fall in USD-ILS comes despite the central bank intervening by $1.2bn during the month.

"In our view, BoI's FX interventions will only create near-term reversals and not make a dent into the primary trend. In order to stem appreciation pressure over the medium-term, BoI would have to drop interest rates to negative, which the CB resists. We see USD-ILS at 3.70 by year-end." said Commerzbank in a report.