Israel's exporting industry expressed concerns over the slumping dollar rates Tuesday, as the American currency's exchange rate plunged to a two-year low of 3.494 shekels. Wednesday's trading began with the currency holding steady at NIS 3.50.
The Bank of Israel has yet to decide whether to intervene in the foreign currency trade in an attempt to stabilize the dollar.
Chairman of the Israel Export and International Cooperation Institute Ramzi Gabbay told Israel Hayom that the shekel/dollar exchange rate has recently suffered some of the worst fluctuations of the past decade.
"The continued erosion of the exchange rate will deal Israeli exporters a crushing blow, especially since we are heading into a recession. I urge the Bank of Israel to continue to reduce the [key] interest rate to the same levels customary in the European Union and United States," he said.
Gabbay stressed that should the central bank decide to intervene in the foreign currency trade, it would not stop the shekel's rise, but it will curb it.
The tumbling dollar rates prompted the Bank of Israel to step in and buy a little under $100 million on Tuesday, in an attempt to stabilize trade, but Tel Aviv Stock Exchange traders said the minor purchase did little to stop to dollar's negative momentum.
According to a report in the financial daily The Marker, Finance Minister Yair Lapid and Bank of Israel Governor Dr. Karnit Flug, as well as senior officials in the bank, have held several meetings on the matter in an attempt to prevent serious monetary damage to Israeli exporters.
Prime Minister Benjamin Netanyahu has also met with Lapid and Flug on the matter, as any decision that affects exporters will affect the Israeli economy as a whole.
A Jerusalem source said Tuesday that if the dollar's exchange rate plunges below NIS 3.30, the government will have to intervene to stop the exporting industry from all but going under. The source added that in the event that a bailout is formulated, it would be of limited scope and time.
Should the Bank of Israel deem the situation extreme it can decide to suspend the foreign currency trade.
The Bank of Israel traditionally refuses to comment on its foreign currency policies. Former Bank of Israel Governor Stanley Fischer said in the past that as a rule, the bank has no "red line" as far as the shekel/dollar exchange rate is concerned, nor does it have one regarding any other foreign currency traded by the Tel Aviv Stock Exchange.
Economy and Trade Minister Naftali Bennett met Wednesday with several exporters, who raised the issue of the dollar rates' fluctuation, as well as other issues, such as how to increase Israel's competitive edge worldwide.
Another issue discussed was the regulation the export industry is subjected to, which the exporters would like to see mitigated, to make them more appealing to foreign companies
"In the following week, I intend to continue meeting with the industry heads, to formulate a plan that will meet their various needs. The export industry has been harmed by impossible and disproportional regulation across the board, as well as from the absence of tools that would enable it to compete in the global arena," Bennett said.
"The majority of Israel's corporate giants are really only medium-size companies on a global scale. The dollar rates affect them, but they're not everything."
Bennett added that for the past two weeks, his ministry and the Finance Ministry teamed to formulate aid packages for exporters.