Israeli Shekel Stabilizes On Central Bank's $30B Intervention: ETFs Linked To Nation Rebound After Monday's Sell-Off

Amid the ongoing conflict between Israel and Hamas, Israeli financial assets are on a path to recovery after a turbulent sell-off on Monday.

The Israeli shekel (ILS) has marginally weakened by 0.1% as of 11:10 AM ET on Tuesday, following a 2.7% loss during Monday’s session, which marked the most significant drop since March 2020. The Israeli currency is presently trading at nearly 4 shekels per USD, which is the lowest level since February 2016.

In response to the shekel’s depreciation, the Bank of Israel initiated a substantial sale of foreign currency, amounting to $30 billion, in the open market on Monday. This move represents the bank’s first intervention in approximately two years with the primary goal of preventing further devaluation of the shekel due to the ongoing war and to ensure the necessary market liquidity.

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Chart: USD/ILS (Amount of Israeli shekels needed to purchase 1 USD)

Economists Believe Bank of Israel Has Ample Room To Intervene

Goldman Sachs has observed that Israel’s fundamental balance of payments position is currently much more resilient than in previous major periods of escalating tensions and conflict. Presently, Israel boasts a significant surplus in its current account, reduced reliance on foreign capital inflows, and an unusually elevated foreign currency reserves position, equivalent to $203 billion, constituting 39% of its GDP.

This robust balance of payments position mitigates Israel’s economic and financial vulnerability to unforeseen shocks, as noted by economist Tadas Gedminas of Goldman Sachs.

Additionally, it eases the Bank of Israel’s task in addressing any potential financial stability concerns arising from the ongoing conflict with Hamas.

Meanwhile, Israeli stocks are making a recovery following a significant drop on Monday. Cathie Wood‘s ARK Israel Innovative Technology ETF IZRL has gained 2.6% after enduring a decline exceeding 5% on the previous day.

The iShares MSCI Israel ETF EIS has witnessed a 1.2% uptick, rising from the substantial 7.1% drop experienced on Monday.

The BlueStar Israel Technology ETF ITEQ has shown a 1.6% increase, bouncing back from a 3% dip observed in the preceding trading session.

Outstanding daily gainers among Israeli stocks were Satixfy Communications Ltd. SATX, up 20%, Nano-X Imaging LTD NNOX, up 9%, LivePerson Inc. LPSN, up 8.5%, Innoviz Technologies Ltd. INVZ, up 8%, Fiverr International Ltd. FVRR, up 6.7% and SolarEdge Technologies Inc. SEDG, up 5.4%.

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