Aug. 14 (Bloomberg) -- Israel’s shekel headed for the biggest loss in a month in the second-biggest depreciation among major currencies after the Bank of Israel, which is awaiting nomination of a new governor, bought dollars to curb the rally.
The currency weakened 0.4 percent, the most on a closing basis since July 17, to 3.5698 a dollar at 5:34 p.m. in Tel Aviv. The shekel is the second-worst performer among major 31 currencies tracked by Bloomberg today. The central bank bought a few “tens of million of dollars,” according to Rony Gitlin, head of spot trading at Bank Leumi Le-Israel in Tel Aviv. Bank of Israel spokesman Yoav Soffer declined to comment when contacted by e-mail by Bloomberg News.
The shekel will drop as much as 3.4 percent by the end of year, according to the most accurate forecasts compiled by Bloomberg, on bets the central bank will continue its interventionist policy despite the absence of a new governor. Prime Minister Benjamin Netanyahu’s has been struggling to replace Stanley Fischer, who stepped down at the end of June. Karnit Flug, Fischer’s handpicked deputy, is acting as caretaker.
“The interim governor is showing the market that the central bank is continuing its policy although a new governor hasn’t been put in charge,” said Leumi’s Gitlin.
The shekel has advanced 4.4 percent this year, the best performer among 31 major currencies tracked by Bloomberg. Jacob Frenkel, a former central bank chief, and Leonardo Leiderman, the chief economist at Bank Hapoalim Ltd., abandoned their nominations for the governor’s role.
The Bank of Israel’s currency buying slowed in July, the month after Fischer’s departure, as the central bank purchased $255 million compared with a total of $1.44 billion a month earlier. The regulator in May cut interest rates twice and announced a $2.1 billion foreign currency purchase plan to counteract the effect of natural gas production on the shekel and support the economy.
The Manufacturers Association of Israel has warned that the strong shekel makes exports, which account for about 40 percent of gross domestic product, more expensive and less competitive.
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