Israel’s central bank on Monday said it will sell up to $30 billion in foreign exchange to prop up the country’s shekel currency following market uncertainty in the wake of Hamas’ incursion from the Gaza Strip.
The central bank issued a statement announcing the plan, saying it “will operate in the market during the coming period in order to moderate volatility in the shekel exchange rate and to provide the necessary liquidity for the continued proper functioning of the markets.” It added it would provide additional liquidity of up to $15 billion in the market as well.
This decision comes as the shekel fell to a near eight-year low against the US dollar in early trading Monday. The dollar inched higher as military clashes between Israel and the Palestinian Islamist outfit Hamas deepened political uncertainty across the Middle East.
According to the Reuters news agency, risk sentiment was fragile after Israeli forces fought Hamas gunmen over the weekend, hours after the group launched an attack on Israel that escalated the violence in the region, claiming more than 1100 lives.
The agency said the Israeli shekel was last roughly 2.5% lower at 3.9325 per dollar after the Bank of Israel announced it would sell up to $30 billion of foreign currency in the open market to maintain stability. The shekel tumbled earlier more than 3% to an almost eight-year low of 3.9880 per dollar, the report added.
“If a war breaks out anywhere in the world it is a good idea to hold U.S. dollars. It can therefore come as no surprise that the greenback started trade last night with some gains,” said Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank.