Israel's Foreign Currency Reserves Drop by $4.6 Billion in September

Israel's foreign currency reserves decreased by approximately $4.6 billion in September, reaching nearly $237 billion. The Bank of Israel reported on Wednesday that the reserves stood at $236.998 billion at the end of September, a drop from $241.6 billion at the end of August. The reserves represent 34.2% of the country's gross domestic product.

The Bank of Israel attributed the majority of the decline to two factors. The primary reason, accounting for about $4.41 billion, was revaluation adjustments due to fluctuations in exchange rates and asset prices in global markets. The second factor involved government foreign currency operations, totaling around $272 million.

Foreign currency reserves serve as a financial cushion managed by the Bank of Israel in foreign currencies and overseas assets, primarily government bonds. They are crucial for the country during crises, enabling the central bank to intervene in the market to stabilize the shekel and bolstering investor confidence in the Israeli economy.

The decrease occurred amidst a volatile period in global bond markets. Yields on long-term U.S. government bonds have surged to levels not seen since the early 2000s, with the 10-year bond yield increasing by approximately 0.6 percentage points since late July. This global trend can diminish the dollar value of reserves even without direct sales, as bond prices fall or held currencies weaken against the dollar.

Separately, the Bank of Israel also released its monthly update on programs implemented since the start of the war, as of September 30. These include a foreign currency sale program of up to $30 billion and a swap mechanism of up to $15 billion, designed to moderate shekel exchange rate fluctuations and maintain market liquidity. In currency markets on Wednesday, the dollar strengthened against the shekel, trading around 3.07 shekels, an increase of about 0.8%.