Israel backing shekel with unprecedented $45B program

The Bank of Israel plans to sell foreign exchange for the first time and supply dollar liquidity to local lenders as part of an unprecedented program to support markets following the surprise attack by Hamas militants, Report informs via Bloomberg.

The central bank will sell as much as $30 billion and extend up to $15 billion through swap mechanisms, according to a statement on Monday. The goal of operating in the market during the coming period is to smooth out volatility in the shekel’s exchange rate and provide the necessary liquidity, it said.

Israel’s currency fell as much as 2% at the open before paring losses. It traded 0.6% weaker at 3.8686 per dollar as of 8:43 a.m. local time.

It’s the first intervention by the central bank in about two years and the first time ever it’s selling dollars. The decision to support the shekel follows the deadliest attack on Israel in decades, with Prime Minister Benjamin Netanyahu said the war with Hamas militants in the Gaza Strip will be lengthy and “difficult.”

Policymakers have resisted supporting the shekel even as investor concerns surrounding the government’s controversial efforts to weaken the power of the judiciary weighed on the currency for months. The shekel is one of the biggest losers this year among a basket of 31 major currencies tracked by Bloomberg.