Bank of Israel Buys Dollars to Slow a Surging Shekel

The Bank of Israel disclosed that it bought roughly 800 million dollars in May to limit the sharp appreciation of the shekel against the dollar, the financial daily Globes reported. The intervention came as the United States currency weakened broadly.

The move is notable for its direction. A central bank buying dollars to weaken its own currency is acting against a strong shekel, which threatens Israeli exporters by making their goods more expensive abroad. The Times of Israel reported that the shekel had strengthened to about 2.799 to the dollar at the end of May before the rate returned toward 2.94.

Israel's foreign exchange reserves stood at about 238.7 billion dollars at the end of May, up nearly 3 billion dollars from a month earlier, consistent with the reported purchases. The strength of the shekel during a war reflects in part heavy capital inflows and the relative weakness of the dollar rather than confidence in the regional outlook.

The episode illustrates a wider currency story. A softer dollar is prompting several central banks to intervene to protect competitiveness, a reminder that exchange rates are being shaped as much by movements in the dollar itself as by local conditions. For a sound-money reader, it is another sign of how managed the global currency system remains.