Bank of Israel continues to increase its forex reserves on a steady basis; last month the Bank raised its reserves by $135 million.
According to the recent press release by Bank of Israel, the Bank’s foreign exchange reserves rose during August by $135 million compared with July 2011; the total foreign exchange reserves of Bank of Israel reached $78,078 million – the highest foreign exchange reserves the Bank had had in over two years. The main reason for the increase is due to the revaluation of the reserves; on the other hand the growth was offset by government transfers abroad and private sector transaction.
Israel’s high basic interest rate probably helped keep the NIS strong against major currencies including the USD. That being said, the NIS depreciated against major currencies including the USD and EURO during August: the New Israeli Shekel lost 3.7% of its value against the USD and 5% against the Euro. The NIS also weakened against the currencies bundle trade-weighted average by 3.7%.
The chart below shows the development of the USD/NIS exchange rate in the past couple of years against the changes in the Israeli basic interest rate.
Lior Cohen, M.A. economist and blogger at IBR and Trading NRG.
- S&P raised Israel’s credit rating from A/A-1 to A+/ A-1
- Bank of Israel kept interest rate unchanged at 3.25%