Bank of Israel Halts Dollar Sales as Shekel Surges; Unprecedented Move Amidst War

Bank of Israel abruptly ceased its dollar sales in November after initiating a plan to sell $30 billion to fortify the shekel amidst the ongoing conflict. The bank had previously sold $8.2 billion in October, but the volume plummeted to a mere $300 million the following month.

During November, the dollar experienced a notable 7.8% depreciation against the shekel. Simultaneously, the euro also saw a substantial decline compared to the Israeli currency, dropping from NIS 4.34 on October 24 to NIS 3.99.

This move by the central bank marks a rare departure from its historical practices. Since adopting a floating exchange rate regime in the 1990s, the Bank of Israel had never before implemented a plan to sell dollars to counter devaluation.

The decision to intervene came just two days after the outbreak of the war, with the central bank pledging to operate in the market as necessary to stabilize the shekel's exchange rate and ensure liquidity for the regular functioning of the markets.

The war initially caused the dollar to spike to NIS 4.08, reaching a level not seen since 2015. However, since the announcement of the dollar sale plan, the American currency has experienced a significant weakening, currently trading at NIS 3.699.

This unprecedented move by the Bank of Israel reflects the economic challenges posed by the conflict and underscores the lengths to which the central bank is willing to go to manage the fluctuations in the currency exchange market.