Image via WikipediaFischer has recently been intervening in currency trading in an attempt to check the dollar's continued slide against the shekel, a phenomenon that is damaging to Israel's export sector. Due to recent purchases of dollars, the BOI's foreign currency reserves now stand at a record level of over $66 billion.
Frenkel, speaking to Globes, questioned whether it was possible to "permanently support the exchange rate against basic market forces" and stated that the answer was "no," noting that Fischer's policy of currency intervention was too small in relation to the market.
However, Frenkel acknowledged, Fischer's course of action was a tactical step, not a strategic one, that suited the prevailing circumstances. He added that officials would prefer not to intervene in currency, and said that Fischer needed to make clear that the BOI's intervention was not intended to shoulder responsibility for business profitability in the private sector.
"The trading pattern of Israel needs to reflect the fact that the world is changing," he stated.
The former BOI head also cautioned against possible inflation, especially in nations like Israel that have, as he put it, "inflation in their historical DNA."
