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Bank of Israel raises equity investment in forex reserves
March 30, 2014 / 3:11 PM / 4 years ago

Bank of Israel raises equity investment in forex reserves

JERUSALEM, March 30 (Reuters) - The Bank of Israel said on Sunday it planned to increase to 8 percent its equity investment in the country’s foreign currency reserves in 2014, while starting investment in corporate bonds as part of a plan to allow for higher risk.

The central bank in 2013 increased its equity allocation to 6 percent from 3 percent and was expanded to Germany, France and the UK.

Israel’s foreign exchange reserves ended 2013 at $81.8 billion, a rise of $6 billion from 2012.

Some $3.2 billion of the purchases last year were within the framework of the Bank of Israel’s intervention “intended to moderate exchange rate volatility which is not in line with fundamental economic conditions in Israel,” it said.

Another $2.1 billion were purchased as part of a plan that began in May 2013 to moderate the effect of natural gas production on the exchange rate.

The central bank noted that it changed its risk profile to allow for absorbing more loss without negatively impacting the achievement of the goals for which the reserves are held.

“The change in the risk profile was made possible by the increase in the level of the reserves and the integration of foreign exchange purchases within the framework of the natural gas program, which are characterised by a longer term investment horizon,” it said.

The central bank aims to buy another $3.5 billion in 2014 as part of its natural gas offset programme.

Reserves reached a record $84 billion in February. (Reporting by Steven Scheer)

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