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Kurr
Penny Hoarding Member
584 Posts |
 Posted - 07/10/2008 : 16:02:26
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Bank of Israel Announcement Slams Down Shekel
by Hillel Fendel
(IsraelNN.com) The Bank of Israel put the brakes on the shekel's upward climb, and announced it would purchase $100 million a day. The shekel reacted with a sharp plunge against the dollar.
With the dollar dropping on Wednesday to a 12-year-low rate of 3.23 shekels, Bank of Israel and its chief, Stanley Fischer, announced an unprecedented plan to begin purchasing dollars at the rate of 100 million per day. The bank had been buying a quarter of this amount, 25 million of the greenbacks, each business day for over three months, when the dollar was in the midst of its plunge from 3.85 shekels at the beginning of the year.
"We are increasing our daily purchases," a senior Bank of Israel official said, "and we will test how this will affect the exchange rate."
In fact, the rate jumped immediately after the announcement by about 10 agorot. The dollar had been trading at 3.21 shekels, and the official representative rate was announced around 3:30 PM at 3.314 shekels to the dollar. It continued to climb, jumping five more agorot within two hours.
Analysts cautioned, however, against judging the decision based on a given hour or day's worth of exchange rate changes.
The Bank's decision means that Israel's dollar reserves will climb from $28 billion to somewhere between $35-40 billion. Fischer has received praise for his activist approach, though fears have been expressed that it might lead to increased inflation.
The low dollar has been deadly to exporters, who receive dollars that are worth less and less each day for their merchandise.
The Bank of Israel has raised interest rates by a half-percent over the past two months, in an attempt to forestall inflation. Inflation over the past 12 months has reached 5.4%, compared with the Bank of Israel's target level of 1-3%.
-Again I do not understand this. We give them currently 30 bilion over 10 years and passed a 170 million just weeks ago, why buy dollars?
Also I read somewhere that the shekel is pegged to the dollar so I dont understand the profit from an exchange rate.
With the dollar tanking and everyone secretly wanting to dump greenbacks, why are they investing heavily?
Kurr
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Always willing to trade copper for pm's
A number of people are educated beyond, sometimes way beyond, their intelligence. - Tenbears
My Ebay items: http://tinyurl.com/5pqkho |
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Ponce
Penny Pincher Member
Cuba
174 Posts |
Posted - 07/10/2008 : 16:09:03
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| The state of Israel holds a very high rate of US bonds (I don't remeber the ammount) and yet we still give them between 3 and 7 billions dollars per year........two weeks ago we promised them 10 more billions dollars on top of the other loans.........your tax dollar at work. |
"If you don't hold it, you don't own it"...Ponce |
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HoardCopperByTheTon
Administrator
USA
3603 Posts |
Posted - 07/10/2008 : 19:07:32
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Darn.. missed the peak.. I could have dumped all my shekels.  |
If your percentages are low.. just sort more. If your percentages are high.. just sort more.
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swusc
Penny Collector Member
491 Posts |
Posted - 07/10/2008 : 21:25:23
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You will see a lot more of this. Countries are in a pickle.
1. You don't want to hold dollars because of their value dropping(exchange rate/inflation).
2. You don't want the exchange rate to drop because it hurts your exporters.
Well what can you do? Issue your currency and buy dollars on the foreign exchange markets. This supports the dollar vs your currency and therefore protect your exporters. It also protect your country from U.S. imports.
Now you have more dollars though! Well you can buy assets with the dollars if you don't want to hold them. Oil, gold, silver, gas, corn, sugar, and a lot of things are trade on the world markets in dollars. Now you can spend them and get assets without having to hold dollars.
Best of both worlds.
I call it the race for the bottom in the value of your currency. It has happened before on a pretty large scale. 1930s would be the time frame.
Someone is going to lose. I have a feeling it is going to be the world. The U.S. is going to end up screwing the world when they are holding paper that has greatly been devalued. Everyone is going to get to see the screw over from inflation because everyone was trying to save the dollar by printing their currency. At least the U.S. is getting goods in the process.
-SWUSC |
`Everybody is ignorant. Only on different subjects.' Will Rogers
"This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the "hidden" confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard." Alan Greenspan, 1966. |
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misteroman
Moderator
USA
1246 Posts |
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horgad
1000+ Penny Miser Member
USA
1352 Posts |
Posted - 07/11/2008 : 07:36:35
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Business must be good when you are the 96th largest country in the world, but the number 4 largest arms dealer.  |
Edited by - horgad on 07/11/2008 07:38:59 |
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Cerulean
Penny Hoarding Member
USA
655 Posts |
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swusc
Penny Collector Member
491 Posts |
Posted - 07/11/2008 : 14:01:14
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quote:
Originally posted by Cerulean
Wikipedia says nothing about the Israeli Sheqel being pegged to anything else:
http://en.wikipedia.org/wiki/Israeli_new_sheqel
Any country can defacto peg their currency to a weaker one. They just have to print their money and buy the weaker one with it. This will basically put a floor on the exchange rate. Now if they can't peg to a stronger currency because they don't have an unlimited supply of the other currency to sell to support their currency.
The countries that peg to the dollar official or not for the most part have enough dollars to support their currency or print enough of theirs to support the dollar to force the peg. If they just do it by law, then the black market will create a different rate and smart people will use that one.
-SWUSC |
`Everybody is ignorant. Only on different subjects.' Will Rogers
"This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the "hidden" confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard." Alan Greenspan, 1966. |
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Bank of Israel Announcement Slams Down Shekel
