Bank of Israel buys $801 million in foreign exchange amid shekel volatility

At the end of May, Israel’s foreign exchange reserves reached a record $238.681 billion, an increase of about $2.95 billion from April.

By Pesach Benson, TPS

The Bank of Israel purchased approximately $801 million in foreign currency in May, according to its monthly reserves report, in an intervention aimed at countering what officials described as irregular trading activity amid a sharp appreciation of the shekel.

The central bank said the operations were carried out “on an ad hoc basis” to maintain the orderly functioning of markets, emphasizing that it was not targeting a specific exchange rate level.

The move comes after the shekel strengthened to a 33-year high against the U.S. dollar, reaching around NIS 2.80 before later weakening to roughly NIS 2.94.

Market participants had initially believed the Bank had largely refrained from significant intervention in May, but later data showed substantial purchases alongside valuation gains in Israel’s foreign exchange reserves.

Brokers also reported possible additional intervention in recent trading sessions, though the Bank of Israel declined to comment beyond its monthly disclosure policy.

At the end of May, Israel’s foreign exchange reserves reached a record $238.681 billion, an increase of about $2.95 billion from April.

The rise was driven mainly by a $2.68 billion revaluation of existing assets, the Bank’s dollar purchases, and offset partially by approximately $721 million in government foreign currency activity.

The reserves now equal 37.2% of gross domestic product.

The shekel’s volatility has been influenced by global market movements, including declines on Wall Street that prompted institutional investors to rebalance portfolios and increase dollar exposure.

Domestically, policymakers have faced criticism over monetary policy, with some business leaders arguing that the strong shekel has hurt exporters and the technology sector.

The Bank of Israel did not provide details on the exact timing of its interventions, but officials stress that actions are taken only when unusual or disorderly trading conditions are detected.