Reports say that the Bank of Israel (BOL) is projected to purchase more than $30 billion of foreign currency in 2021. These claims were backed by Governor Amir Yaron. According to the governor, “given the economic and market conditions at the time, we will be able to increase the scope of the foreign exchange purchase program, just like when we announced, previously, the expansion of the government-bond quantitative easing plan.”
In the previous year, Bank of Israel announced that there were plans to buy 50 billion shekels ($15 billion) but this amount was raised to 85 billion shekels in government bonds, increasing the shekel’s value by 8% when compared to the American dollar. The year before last, the shekel managed to gain another 8% against the dollar.
Currently $1 stands at 3.2866 shekels, having slipped 5% since the Bank of Israel’s announcement back in January regarding their intentions, followed by their purchase of $6.8 billion of foreign currency. According to experts, their intervention plan has worked and analysts have indicated that the “speculative flows have been mostly scared away”. The strength of the shekel has been attributed to the weak dollar which has been weakened in part due to the lower imports in 2020, caused by the coronavirus pandemic.
The attempt to stem the appreciation of the shekel has seen immense success. According to a statement the bank made, there actions have stabilized their domestic currency, “Given the economic and market conditions at the time, we will be able to increase the scope of the foreign exchange purchase program, just like when we announced, previously, the expansion of the government-bond quantitative easing plan.”
The global economy is under intense pressure at the moment in order to recover the losses the pandemic has wreaked. America has turned to Arabic investments in hopes for a healthy recovery. The pandemic has created a deficit and caused financial problems for consumers and business-owners alike. The average Joe is making 20% less than they had been prior to the outbreak which has led many looking towards Forex as a means to recuperate their losses.
Back in March 2020, the Australian dollar plummeted to an all time low of $0.55 which enticed many investors into jumping on the Australian bandwagon. Investors were scrambling for a trusted broker and asking questions such as, “Is Pepperstone regulated?” The company which brokers between Australian dollars and verified for the FCA provides numerous benefits to traders and has a long list of pros, and hardly any cons. Those that had made their investments in AUD one year ago would find themselves sitting on a mini fortune as the Australian Dollar has recovered to its $0.77 standard.
With the COVID-19 vaccine on the roll and dominating markets around the globe, it will quickly bring about some semblance of normalization. In a bid to restore confidence in small businesses around the country, The Bank of Israel loaned another 3.1 billion shekels to support their banking system, effectively bringing the total of its loan amount during the pandemic to a whopping 22.7 billion shekels.
Offering such financial support offers their citizens strong support and in turn, fuels their economy by further stabilizing it. As reported by the Monetary Committee in Israel, these actually are “to support the achievement of the Bank of Israel’s objectives and the recovery of the economy from the coronavirus crisis, and in particular to support employment in export industries and import substitute industries, continued foreign exchange market intervention at a broad scope will be required in 2021.”
According to reports, these foreign currency acquisitions by the Bank of Israel will continue so long as they have the funds to do so, and they don’t have any plans to stop, revealing that their further plans will be announced by the end of 2021, illustrating that investing in foreign currency “continues to be a very major player in the foreign exchange market,” which has effectively helped them curb the growth of the shekel. The head of foreign options desk at Bank Hapoalim Ltd, Itai Yosha, was quoted saying that the announcement of the bank’s intention of buying dollars has “pushed the dollar so far to an increase of more than 8 agorot” even though no actual purchase has been made. Just imagine what a difference they could make once their purchase goes through? As foreseen, upon the actual purchase of the $30 billion in foreign currency, the Bank of Israel will exceed their projected threshold and go on to represent more than “half of Israel’s GDP.” The bank’s statement continues to support their intentions by announcing that, “The Monetary Committee assesses that in order to support the achievement of the Bank of Israel’s objectives and the recovery of the economy from the coronavirus crisis, and in particular to support employment in export industries and import substitute industries, continued foreign exchange market intervention at a broad scope will be required in 2021.”
With Israel as a power player in today’s economic landscape, it’s worth paying attention to what they are doing and how they are doing it.