Israel’s central bank sells $30 billion in foreign reserves

The Bank of Israel on Monday announced it will sell up to $30 billion in foreign reserves in a bid to support its domestic currency which has fallen sharply following the deadly incursion by Hamas militants over the weekend.

The Israeli shekel last weakened 1.63% to trade at 3.90 against the greenback, marking its weakest in seven years.

“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,” the central bank wrote in a statement released Monday.

On top of the $30 billion program, the bank added it will provide liquidity to the market through SWAP mechanisms in the market of up to $15 billion.

“The Bank of Israel will continue monitoring developments, tracking all the markets, and acting with the tools available to it as necessary,”

On Sunday, Israel’s benchmark TA-35 index closed 6.47% down to post its largest loss in more than three years, going back to March 2020. The index inched up 0.11% in its first hour of trade Monday after the announcement made by the Bank of Israel.

Other Middle East bourses posted declines. Egypt’s EGX 30 dipped 0.6% Monday, and Saudi Arabia’s Tadawul All Share Index slid 0.55%.

“The Israeli economy is very strong,” Zvi Eckstein, former deputy governor at the Bank of Israel, told CNBC via telephone. “Unless there [is] an Iranian physical attack, it’s very likely that Israel will get back to fully functioning economically within a week or two,” he said. 

“The Israel currency will be a bit devalued because both Israelis and foreigners are going to reduce their exposure to Israel as the risk of Israel as an economy goes up,” Eckstein, who is currently emeritus professor of economics at Tel Aviv University, added.

At dawn on Saturday during a major Jewish holiday, Palestinian militant group Hamas launched a multi-pronged infiltration into Israel — by land, sea and air using paragliders. The attack came hours after thousands of rockets were sent from Gaza into Israel.