The Bank of Israel’s foreign exchange reserves at the end of December rose by $ 4.25 billion to a peak of $ 213 billion, according to a report published today by the Bank of Israel. The increase in the volume of reserves in December is explained, among other things, by $ 739 million.
In November, the Bank of Israel purchased about $ 4 billion, against the background of the sharp increase recorded as a result of the Bank of Israel’s intentions to reduce its involvement in the foreign exchange market. This follows purchases of more than $ 30 billion from January last year. Despite the acquisitions, the shekel continued to strengthen last year, with the shekel (average exchange rate) strengthening by 6.6% against the dollar, the shekel strengthened by 9.4% against the Japanese yen and 2.6% against the euro.
Factors supporting the strengths of the shekel, the surplus in the current account, especially in light of the sharp increase in exports of high-tech services – are likely to continue. At the same time, against the background of the sharp increase in the volume of assets overseas, institutional investors hedge a significant portion of their investment and thus strengthen the shekel. The continued declines in the markets, especially in the Nasdaq index, which has a high correlation to the dollar-shekel exchange rate, may ease the pressure from institutional hedges.