The Bank of Israel will sell foreign exchange for the first time since it allowed the shekel to trade freely as part of an unprecedented program to support markets following Saturday’s surprise attack by Hamas militants.
The central bank will sell as much as $30 billion and extend up to $15 billion through swap mechanisms, according to a statement on Monday.
The goal of operating in the market during the coming period is to smooth out volatility in the shekel’s exchange rate and provide the necessary liquidity, it said.
After having long been concerned about the shekel’s excessive appreciation, the Bank of Israel’s intervention marks a reversal and is meant to prevent the currency from falling. The move follows the deadliest attack on Israel in decades, with Prime Minister Benjamin Netanyahu saying the war with Hamas militants in the Gaza Strip will be lengthy and “difficult.”
Israel’s currency slid to a session low despite the intervention, after briefly erasing losses. The currency fell 2.2% to 3.9246 against the dollar as of 11:30 a.m. local time, the weakest since 2016.
The country’s benchmark TA-35 stock index fell 0.3%, extending a 6.5% drop from Sunday. Stock markets across the Middle East fell amid concerns the war might escalate into a broader conflict, with Dubai’s benchmark gauge losing 2.8%.
A program of currency interventions begun more than a decade ago by then-Governor Stanley Fischer to stem the surging shekel helped the central bank amass reserves that now surpass a third of gross domestic product.
They stood at nearly $203 billion at the end of August.