Photo Credit: Screenshot from YouTube
Deputy Central Bank Chief Andrew Abir

The Bank of Israel has announced it was buying $30 billion in foreign currency in 2021 to reverse the year-long trend that landed the value of the shekel at a 25-year high of NIS 3.11 to $1 US. And while sitting on such a strong currency may be great for Israelis on shopping sprees on Amazon and Alibaba, or those booking flights and hotel rooms in the few remaining green countries on the planet – such a strong shekel is killing exports for industry, agriculture, hi-tech, and, once the country emerges from the pandemic, it would surely kill tourism as well.

And so, after weeks of using more restrained methods to save the economy from currency speculators who decided to park their billions in shekel shelters, Deputy Central Bank Chief Andrew Abir said on Thursday: “We are in an unusual situation of double-digit unemployment and negative inflation, and the Bank of Israel is committed to achieving the goals set by the government in the Bank of Israel Law, the inflation target and support for growth.”

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Speaking at a briefing for reporters, Abir delivered a stern message that the Bank of Israel would not waver from the announced volume of purchases, which will also raise Israel’s foreign currency reserves to $200 billion, or about 10 times the amount it usually likes to hold.

Abir insisted: “If we are going to err, we want to err on the side of too much expansion rather than on the side of too little expansion,” which is why “we decided that we will buy $30 billion on the market in 2021.”

“Let there be no uncertainty, we will buy the entire $30 billion in 2021,” he reiterated. “The current situation is exceptional, and so we announced an exceptional measure. It makes no difference to us if the reserves are $150 billion or $200 billion. If anyone sold dollars the other day, I’m sorry, tough luck.”

He pointed out that in the time since his announcement, the dollar exchange rate had jumped from NIS 3.11 to NIS 3.19, because individuals were closing their stop-loss orders. Currency speculators are the most hypersensitive pack in the market, and they recognized the deputy chief was for real. Which means the deputy chief got his game changer through before buying the first dollar.

“We are not prepared to let the exchange rate determine workers’ livelihoods,” Abir said. “I have no problem in continuing to buy dollars even at NIS 3.30 to $1 US, NIS 3.40 and NIS 3.50.”

There may be another reason for the anticipated rise of the dollar: President-elect Joe Biden’s Stimulus speech on Thursday. Biden proposed a $1.9 trillion rescue package to combat the economic downturn and the Covid-19 crisis. The package includes essentially federalizing the war on the Corona pandemic, allocating more than $400 billion to accelerate vaccine deployment and to reopen schools over the next 100 days. The package also offers $350 billion to help state and local governments manage their budget losses, and raises to $1,400 the direct payments to individuals, as well as higher unemployment benefits, federally mandated paid leave for workers, and substantial subsidies for child care.

All told, the president-elect’s stimulus is 50% bigger than the Obama administration’s had offered in 2009, following the economic collapse left by the GW Bush administration. The Biden proposal also follows several trillion dollars in economic aid already approved by Congress last year under President Trump.

Back in 2010, following the Obama stimulus, the dollar regained its strength compared to the shekel by 5.3%, following its 8.7% drop in 2009. The average exchange rate in 2010 was NIS 3.73 to $1 US.

So, like the deputy chief said, don’t get rid of your dollars just yet. Hope is around the corner.

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David writes news at JewishPress.com.