Why is Bank of Israel buying hundreds of millions of dollars?

The shekel continued to strengthen for a fifth straight session and there’s a dealers’ rumor that The Bank of Israel bought hundreds of millions of dollars of foreign currency on Monday.

One dealer at an Israeli bank said the central bank started buying at a dollar-shekel rate of around 3.84.

The dollar-shekel exchange rate rapidly moved to 3.85 after financial newspaper The Marker reported that the bank’s intervention policy had appeared on the hit list by Prime Minister Benjamin Netanyahu’s chief economics advisor, Avi Simhon. According to Simhon, the intervention was identical to a protective tariff that raises prices for consumers by deterring import competition.

The central bank has been buying dollars for 8 years now and its foreign currency reserves increased up to $96.5 billion so far.

According to Governor Karnit Flug’s words, most central banks are using quite accommodative policies, delegated to weaken their currency.

The central bank hasn’t given any comments on the news yet.

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