Bank of Israel Halts Dollar Sales as Shekel Strengthens; Exporters Face Challenges Amid Economic Shifts

Bank of Israel announced a cessation of foreign currency sales in November 2023, as the shekel experienced a notable strengthening trend. The foreign currency balances at the end of the month amounted to $198.17 billion, with a mere $338 million sold during that period.

This decision follows the Bank's earlier commitment to sell $30 billion at the beginning of the war to prevent the shekel's collapse. In October, they sold $8.2 billion, but November saw a pause, likely attributed to the shekel's robust performance, particularly in the last two weeks.

As of today, the shekel's strength persists, with the dollar trading at around 3.7 shekels and the euro at 3.98 shekels. The euro, however, has hit a six-month low at 3.985, influenced by weak economic data in a Eurozone country.

While the strengthened shekel poses challenges for exporters and manufacturers, it brings advantages such as cheaper imports of raw materials and bolstering state coffers. Furthermore, the continuing depreciation of the dollar could impact tax discounts on fuel, potentially reducing or eliminating them.

Despite the war affecting international travel, those venturing abroad will experience cost savings of approximately 10% on expenses like plane tickets, hotels, car rentals, and shopping, compared to the war's early days.

Yossi Freiman, CEO of Freeco Risk Management, Financing, and Investments, commented on the situation, stating, "Foreign exchange supply of the business sector, in the absence of significant buyers, floods the market with foreign exchange and leads to the strengthening of the shekel. In our estimation, against the background of the fact that the basic factors for the shekel's depreciation remain valid, the potential for the shekel's appreciation is limited. The activity at the end of the financial year, when institutional bodies carry out window dressing contributes to fluctuations in the capital markets, a move that is expected to increase as we move into the second half of December."