May 6 (Bloomberg) -- The shekel dropped the most in almost three months after the Bank of Israel bought U.S. dollars for the third time in a week.
The central bank purchased “small amounts” of dollars, with the total less than $100 million, said Rony Gitlin, head of spot trading for Bank Leumi Le-Israel Ltd. Bank of Israel spokesman Yossi Saadon declined to comment. The bank confirmed April 8 that it “acted” in the currency market. That was the first intervention in almost two years after the shekel rose as much as 1.1 percent to 3.5898 a dollar. It also purchased the currency on April 30 and May 2.
The shekel fell 0.3 percent to 3.5658 a dollar at 5:02 p.m. in Tel Aviv. The currency earlier slid as much as 0.8 percent, the most since Feb. 21. It has surged 9.2 percent in the past six months, making it the best performer among 31 major currencies tracked by Bloomberg. Syria accused Israel of attacking targets on the outskirts of Damascus, drawing threats of retaliation.
“The central bank decided to intervene as even the heightened tension with Syria failed to have a significant impact on weakening the currency,” said Leumi’s Gitlin. “We are still seeing investors buying the shekel, which supports the continuing trend of the direction of the currency.”
The shekel on May 3 completed its longest stretch of daily gains in more than three decades after billionaire Warren Buffett’s Berkshire Hathaway Inc. agreed to pay $2.05 billion for a stake in an Israeli company, the latest of almost 150 acquisitions in the country in the past year.
The Manufacturers Association of Israel today called upon the central bank to look into the shekel-dollar exchange movement in the past six months which its head Amir Hayek said was “extreme‘‘ compared with other U.S. trading partners. Export profits are hurt by a weakening dollar, Hayek added.
Bank of Israel Governor Stanley Fischer, who will step down at the end of June, is credited by some economists with helping the nation weather the world financial crisis by buying foreign currency to curb shekel strength and support exports. Reserves, which stood at $77 billion at the end of March, more than doubled as a result of the purchases, which ended in July 2011.
Israel’s base lending rate at 1.75 percent isn’t low enough to stop capital inflow affecting the exchange rate, Fischer said last month. The central bank held the key rate for a third month in March, giving the nation relatively higher rates than its main trading partners, the U.S. and Europe. The next scheduled base rate announcement is on May 27.
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