The Bank of Israel announced today a 2.6 percent devaluation of the Shekel. It now stands at 227.81 to $1.00.
According to the central bank the latest devaluation was a technical adjustment to accommodate price increases this month. Nevertheless, it was a relatively large devaluation for a single day. Devaluation normally does not exceed one percent per day. The Shekel has dropped in value by 13 percent since the beginning of the month and is down nearly 114 percent since the first of the year.
According to some sources, the latest devaluation was necessitated by the recent strengthening of the U.S. Dollar against the currencies of the European countries to which Israel sells most of its exports. Bank sources denied that the devaluation was in response to the high demand for Dollars on the black market.
Zvi Sussman, a former Deputy Governor of the Bank of Israel, observed that with an annual inflation rate of 350-400 percent, a 2.6 percent reduction in the value of the Shekel was not dramatic. It does not support speculation that the government will introduce a major devaluation before the July 23 elections.
According to Sussman, the situation does not warrant a large scale devaluation. He warned however that if the present pressure on the black market continues, the government may have no choice but to devalue the Shekel drastically to slow down the demand for black market Dollars.
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