The Bank of Israel purchased tens of millions of dollars Tuesday to stem the rise of the New Israeli Shekel after earlier in the day the US Dollar hit a 25 year low against the shekel, officially dropping below the benchmark 3.10 NIS to 1 dollar rate, a threshold the bank had hoped to avoid crossing.
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The Euro also dropped sharply against the New Israeli Shekel and was traded on Tuesday at an exchange rate of NIS 3.511 to 1 euro.
At the end of official trading, the Bank of Israel set the Dollar to NIS exchange rate at $1 to 3.09 NIS. The dollar lost -0.387% of its value in total against the NIS on Tuesday.
A strong NIS is good for Israeli consumers and tourists. It makes traveling abroad cheaper because the NIS increases in value in relation to local currencies. And since airfares and hotel rates are set in either Dollars or Euros, for the most part, when the NIS rises, it costs Israelis less to buy the same item. This also makes foreign imports less expensive for the Israeli consumer.
There is a downside to Israel's economy, however. The strong NIS means foreign investors in Israeli startups get less value for their money. It also means less spending by foreign tourists since their dollars and euros do not go as far. And it also makes Israeli exports more expensive to foreign buyers.
This is not just a problem of a weak US Dollar due to America's fiscal and financial policies vis-à-vis debt and government spending as a percentage of GDP. All of the world's major convertible currencies were down against the NIS.
The British Pound fell -0.247% on Tuesday and finished trading at a rate of NIS 4.1564 to the pound.
As reported by Israel Hayom on Tuesday, in the coming days, Finance Minister Avigdor Lieberman is expected to declare a series of steps to encourage exporters and compensate them over the strengthening NIS. Over the past year, the NIS has strengthened by over 10% against the US Dollar.
BOI Governor Prof. Amir Yaron views the rising inflation in the world as temporary, said: "The market picture is completely different now, and the strengthening NIS could somewhat curb global inflation."
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