Shekel Falls Most Since January as Bank of Israel Buys Dollars

  • Bank bought $150 million to $200 million in market: Prico
  • Governor Karnit Flug pledged earlier this week to intervene

Israel’s currency weakened the most since January after policy makers made good on a pledge to intervene in the foreign-exchange markets, seeking to stem the shekel’s strength and halt 18 months of deflation.

The shekel fell 0.8 percent to trade at 3.8137 per dollar at 2:18 p.m. in New York, the most since Jan. 4 on a closing basis. The central bank bought about $150 million to $200 million, Yossi Fraiman, chief executive officer of Prico Group, said by phone.

Bank of Israel Governor Karnit Flug said this week that the shekel’s strength continues to hamper growth in exports that account for about a third of the country’s economy. The central bank, which held a record $91 billion in foreign-currency reserves at the end of February, left borrowing costs near zero for a 13th month last week as the outlook for economic growth was revised down by the Finance Ministry.

“Karnit is stuck between the rock and the hard place -- she does not wish to go to negative rates,” said Daniel Tenengauzer, a strategist at RBC Capital Markets in New York. “It will continue at least until additional Fed hikes are priced.”

Federal Reserve officials in the U.S. last month left rates unchanged and pared forecasts for 2016 increases to two from four.

Policy makers in Israel also intervened last Friday, when the central bank bought a “medium” amount of dollars, Mercantile Discount said that day. The shekel has weakened 1.5 percent in the past three days after strengthening about 4 percent in March, more than any month since 2011.

Bank of Israel spokesman Yoav Soffer declined to comment.

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