Israel Shekel Gains to 2-Month High as Frenkel Nomination Probed

The shekel gained to a two-month high as Israel’s attorney general starts a probe into Jacob Frenkel’s central bank governor nomination, raising questions over whether the regulator will take steps to stem the rally.

The shekel appreciated 0.3 percent to 3.5657 a dollar, the strongest since May 13, at 4:01 p.m. in Tel Aviv. That was the same day that former Bank of Israel Governor Stanley Fischer unexpectedly cut interest rates and announced a program to buy foreign currency to limit the shekel’s gains. The currency has advanced 4.7 percent this year, the best performer among 31 major currencies tracked by Bloomberg.

Attorney General Yehuda Weinstein will start a probe into Frenkel’s nomination after Haaretz reported that he was briefly detained seven years ago, the Justice Ministry said in an e-mailed statement today. Fischer stepped down at the end of June, and since then the shekel has appreciated 2 percent.

Fischer “always pushed the dollar up for exporters, and if there isn’t a strong governor then no one defends the dollar,” said Moshe Shalom, head of research at FXCM Israel. Karnit Flug, the Bank of Israel’s interim governor, “doesn’t have the backing to make any strong moves” in currency policy, he said.

The shekel also strengthened after annual inflation in Israel quickened to 2 percent in June from 0.9 percent a month earlier, according to data released by the Central Bureau of Statistics yesterday. Israeli markets are closed today for the Tisha B’av fast day.

Frenkel, who served as Bank of Israel governor between 1991 and 2000, was nominated by Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid. Frenkel denied any wrongdoing, calling it an “unfortunate misunderstanding,” according to a July 12 statement, after Haaretz reported that he left an airport duty free shop in Hong Kong in 2006 with cologne he didn’t pay for.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE