The US dollar is flying by almost 2% against the Shekel this evening after the Bank of Israel said that they were stepping up the purchase of foreign currency.
According to Globes: “The central bank says it will buy government bonds to the tune of NIS 200 million daily, and will continue its program of expanding the foreign currency reserves at an average rate of $100 million daily.”
Why the need to weaken the Shekel? It has already dropped buy almost 30% in the last 6-9 months against the greenback. Trying to ignite an economy via inflation is bad news. Come to think of it wasn’t current BOI head Stanley Fischer head of the IMF back during the Asian, Russian and Latin American financial crises at the end of the ’90′s? Isn’t this a similar policy to what he recommended then? If so, look out. I sure hope that speculators don’t drive down the Shekel, like they did to Asian currencies 11 years ago.
How about a strong currency and to attract foreign investment, and lower taxes to help ignite long term growth?
Fischer is playing with fire, and if his track record is any indication, look out!