Oct. 2 (Bloomberg) -- The shekel dropped the most in a week after the central bank said it will increase the amount of dollar purchases next year to weaken the local currency and support exporters.
The shekel slid 0.4 percent to 3.5417 a dollar by 7:14 p.m. in Tel Aviv, the steepest loss on a closing basis since Sept. 25. It gained 5.4 percent this year, the top performer among an expanded group of 31 major currencies tracked by Bloomberg.
The central bank will buy $3.5 billion in 2014 to offset the impact of domestic gas production on Israel’s balance of payments, it said today. The bank announced in May it will buy $2.1 billion this year. Israel started to pump gas from the Tamar field at the end of March, enabling the nation to cut a dependence on Egyptian gas for much of its power generation. For every $1 billion improvement in the BoP, the exchange rate should appreciate about 1 percent, the bank has estimated.
“The central bank is trying to use its tools to weaken the shekel and help exporters,” Eytan Admoni, head of the international department at the Bank of Jerusalem Ltd., said by phone. “It is a fair amount that may help to moderate shekel gains but more buying will be needed to change the strengthening trend of the currency.”
Israel’s move to produce its own gas comes after Egypt cut its flow of gas to the country, forcing companies to switch to more-expensive imported alternatives. Israel recorded a current-account surplus of $1.79 billion in the second quarter, the Central Bureau of Statistics said Sept. 12.
The Bank of Israel yesterday bought a few tens of millions of dollars, according to Rony Gitlin, head of spot trading at Bank Leumi Le-Israel, after the shekel strengthened to the highest level in a week on Sept. 30. Central Bank spokesman Yoav Soffer declined to comment.
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