Israel Shekel Gains Fuel Bets Central Bank to Buy Dollars

Israel’s shekel strengthened to the highest in a week, raising bets the central bank may intervene by buying dollars.

The shekel gained 0.5 percent to 3.6162 a dollar at 9:39 a.m. in Tel Aviv, the highest since July 4. The U.S. currency has depreciated this week against 15 of 16 major currencies tracked by Bloomberg. The dollar declined after Federal Reserve Chairman Ben S. Bernanke said inflation and unemployment rates show the U.S. economy still requires very accommodative monetary stimulus.

“The dollar has weakened almost 3 percent in two days against the euro and the shekel is strengthening accordingly but not as much,” Tal Zohar Avda, chief executive officer of Forex Capital Markets LLC in Tel Aviv, said today by phone. “The testing point for a central bank intervention will be 3.58 shekels per dollar.”

To moderate the shekel’s appreciation, which makes exports less competitive, the central bank restarted a foreign-currency purchase program in April with the aim of buying $2.1 billion by the end of this year. Exports make up 40 percent of Israel’s economic output.

Jacob Frenkel, chairman of JPMorgan Chase (JPM) International, will take over as governor of the Bank of Israel in the coming weeks. He said in February that intervening to weaken currencies “leads nowhere,” stoking speculation he may take a different approach to that of his predecessor.

“There may be some hesitation to intervene in the market because of the new governor,” Zohar Avda said. “But unless announced otherwise, we understand the intervention policy is still in place.”

The yield on the 4.25 percent bonds due March 2023 fell six basis points, or 0.06 of a percentage point, the most in a week, to 3.75 percent.

To contact the reporter on this story: Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net

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

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