Israel cenbank bought $801 million of forex in May amid strong shekel

JERUSALEM, June 7 (Reuters) – The Bank of Israel bought $801 million in foreign currency in May, it said on ​Sunday, in a bid to combat a strong shekel that is ‌trading near a 33-year high against the dollar.

The central bank said its purchases were made on an ad hoc basis “specifically in order to maintain the orderly functioning of the markets.”

The ​purchases helped boost the bank’s foreign currency reserves by $3 billion to ​a record $238.7 billion in May.

It was the first time the central ⁠bank bought foreign currency since early 2022. It had sold some $8 billion at ​the outset of the Gaza war in late 2023.

The shekel had appreciated some ​30% versus the dollar since the beginning of 2025, outraging exporters.

Bank of Israel officials, though, had consistently said they would not intervene as long as there were no market failures, ​while insisting it was one of many tools it could potentially use if ​needed.

At the same time, policymakers had taken a cautious view on monetary policy due to ‌the ⁠fear of fueling inflation.

With inflation holding at a rate of 1.9% in April, the monetary committee lowered its benchmark interest rate (ILINR=ECI), opens new tab to 3.75% from 4%. But the shekel continued to appreciate.

Last week, Bank of Israel Governor Amir Yaron said Israel’s ​short-term interest rates ​could fall at ⁠a faster pace if inflation continues to ease as a result of increased optimism over a ceasefire deal with Iran that ​has pushed down energy prices.

The bank’s staff had estimated ​a key ⁠rate of 3.5% by early 2027.

Since Yaron’s remarks, the shekel has weakened to 2.95 per dollar from a peak last week of 2.80.

Ronen Menachem, chief markets economist at ⁠Mizrahi-Tefahot ​Bank, said Yaron seeks to keep the exchange ​rate to around 3 since it aligns with a model that links the rate to movements ​in the Nasdaq index.