June 4 (Bloomberg) -- The Bank of Israel bought U.S. dollars for the first time this month in a bid to prevent shekel appreciation from undermining growth, traders said. The currency fell for a third time in seven days.
The central bank bought “small amounts” of dollars, said Tom Gerszbejn, a currency trader at Union Bank of Israel Ltd. in Tel Aviv. Rony Gitlin, head of spot trading for Bank Leumi Le-Israel, estimated the purchase at less than $100 million. The bank has continued to intervene since it bought dollars on April 8 for the first time in almost two years as the shekel rose to an 18-month high of 3.5898 a dollar.
The currency fell as much as 0.4 percent, the most this month, to 3.6819 a dollar before trading at 3.6715 at 4:42 p.m. in Tel Aviv. The central bank last month announced the purchase of $2.1 billion by the end of the year. The shekel surged 3.8 percent in the past six months and is the best performer among 31 major currencies tracked by Bloomberg.
“The central bank will continue to intervene in the market as part of its announced policy” to moderate shekel gains and support exporters, Gitlin said by phone.
Exports make up about 40 percent of Israel’s economy which will probably slow to 3.4 percent in 2014 from 3.9 percent this year, according to Organization for Economic Cooperation and Development estimates.
The bank’s monetary policy committee, led by Governor Stanley Fischer, last month also cut interest rates to a three-year low to spur growth and boost exports hurt by shekel gains. Central bank spokesman Yossi Saadon declined to comment today.
Rate reductions by the European Central Bank and Bank of Japan as well as Israel’s natural gas finds had strengthened the shekel to the point where it didn’t reflect economic fundamentals, Barry Topf, senior adviser to Fischer said in an interview on May 29. The Bank of Israel last month trimmed borrowing costs by a cumulative 0.5 percentage point to 1.25 percent.
The central bank today issued 10 billion shekels of one-year Makam bills, with the average yield falling to 1.35 percent from 1.68 percent last month, central bank data on Bloomberg show. The yield on bills due May 2014 fell one basis point, or 0.01 percentage point, to 1.32 percent.
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