Bank of Israel bought $2 billion of forex in March, reserves near $186 billion

JERUSALEM (Reuters) -The Bank of Israel said on Wednesday it bought $1.98 billion of foreign currency in March to help lift its reserves to a record $185.7 billion.

FILE PHOTO: The Bank of Israel building is seen in Jerusalem June 16, 2020. REUTERS/Ronen Zvulun

The reserves, which equate to 46% of Israel’s GDP, grew $635 million last month, the central bank said.

In January, it said it would buy $30 billion of foreign currency in 2021 to try to stem the shekel’s appreciation, after buying $21 billion in 2020.

Since then, Bank of Israel Governor Amir Yaron has said purchases could exceed $30 billion this year.

Over the first three months of the year, the central bank has bought close to $14 billion of foreign currency, $4.9 billion coming in February.

The shekel hit 3.11 per dollar on Jan. 14, its strongest since April 1996. With the help of the central bank’s intervention, it has since eased back and remained steady at a rate of 3.30.

Policymakers have cited a weak dollar globally, strong foreign investment flows into Israel, a wide current account surplus and optimism that a rapid COVID-19 vaccine rollout will quickly lead to an economic recovery after three lockdowns, as underpinning the shekel.

The rise in reserves last month was partly offset by a revaluation that decreased them by some $1.7 billion.

The central bank also said it bought 4.1 billion shekels ($1.2 billion) of Israeli government bonds last month to bring its total since March 2020, when it began the programme, to 58.9 billion shekels. Its balance of corporate bond purchases held steady at 3.5 billion shekels.

The Bank of Israel has said it would buy as much as 85 billion shekels of government bonds.

As part of a plan to encourage credit to small businesses, the bank said it loaned another 3.1 billion shekels to the banking system last month to bring its loan total during the COVID-19 pandemic to 28.1 billion shekels.

($1 = 3.3004 shekels)

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