BoI to sell FX, reduces likelihood of further tightening

ISRAEL - In Brief 09 Oct 2023 by Jonathan Katz
The Bank of Israel announced a program to sell up to $30 billion in foreign exchange. The Bank will operate in the market during the coming period in order to moderate volatility in the shekel exchange rate and to provide the necessary liquidity for the continued proper functioning of the markets.In addition to the $30 billion program, and as necessary, the Bank will provide liquidity to the market through SWAP mechanisms in the market of up to $15 billion.This aggressive intervention by the BOI is expected to significantly moderate the pressure for shekel depreciationThis aggressive FX action by the Boi reduces significantly the chance for further tightening as the war will slow economic activity significantly.. This is positive for the bond market, the long end especially, despite expectations for a higher fiscal deficit. Relative to most DM, Israel's pre-war deficit at around 2% GDP is relatively low, and will most likely increase to 4%-5% (in part, temporarily).

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