The Bank of Israel has announced that it will purchase $3.1 billion in foreign currency in 2015 to offset the effect of natural gas production on the balance of payments and the shekel exchange rate.
In its statement the Bank of Israel said, "The Bank of Israel projects that the overall effect of natural gas production on the balance of payments in 2015 will be $3.1 billion and it will purchase foreign currency during 2015 accordingly."
The Bank of Israel first announced in May 2013, shortly before Prof. Stanley Fischer stepped down as Governor and was succeeded by Dr. Karnit Flug., that it would purchase foreign exchange in coming years in line with the estimated effect of natural gas production on the balance of payments.
the Bank of Israel said, "This purchase program is an additional instrument of the Bank of Israel’s monetary policy and of exchange rate policy which is consistent with it. As in the past, the Bank of Israel will continue to operate in the foreign exchange market in situations of exchange rate fluctuations, which are not in line with fundamental economic conditions or when the foreign exchange market is disorderly."
As of the end of November 2014, Israel's foreign currency reserves totaled $86.328 billion, up from $81.79 billion at the end of 2013, in part due to the purchase program as well as attempts to weaken the shekel. However, in recent months the shekel has been weighed down by the regional security situation, Israel's political uncertainty and the economic slowdown. This has reduced pressure on the Bank of Israel to purchase foreign currency.
Published by Globes [online], Israel business news - www.globes-online.com - on December 9, 2014
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