Shekel Drops Against Euro as Bank of Israel Buys $100 Million

The shekel pared gains against the dollar and weakened against the euro after the Bank of Israel intervened to stem appreciation that may hurt exports. Bonds declined.

The central bank purchased up to $100 million to “prevent the shekel from gaining against a basket of major currencies that includes the dollar and euro,” said Moshe Nir, a trader at Mercantile Discount Bank Ltd. in Tel Aviv. “The situation in Europe is pretty grim and over here it’s not as bad so that bodes well for shekel appreciation.”

The shekel strengthened 0.4 percent to 3.664 as of 4:32 p.m. in Tel Aviv. It earlier rose as much as 0.7 percent. The currency dropped 0.5 percent to 4.8000 against the euro.

The euro declined 6.9 percent against the dollar in November, the sharpest monthly drop since May as European leaders struggled to contain a sovereign debt crisis that forced Ireland to ask for a bail-out. The shekel advanced 6.1 percent against the euro last month, the best-performer among the 10 most-active currencies in Emerging Europe, the Middle East and Africa, according to data compiled by Bloomberg.

The Bank of Israel has been buying foreign currency since March 2008 in an effort to moderate the effect of currency inflows, more than doubling reserves to $69.6 billion by the end of October. About 40 percent of the nation’s gross domestic product is export-based.

The benchmark 10-year Mimshal Shiklit bond due January 2020 declined. The yield rose 7 basis points to 4.62 percent at the close, the highest level since July 15.

To contact the reporter on this story: David Wainer in Tel Aviv at dwainer1@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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