The Bank of Israel in 2014 bought over $7 billion in an effort to prop up the value of the dollar versus the shekel. The purchases were made as part of two separate programs: One, to offset the influence of the dollar on the value of the shekel as part of everyday exchange rates, and the second to prevent the foreign currency set to pour into Israel as a result of its natural gas deals from overly influencing the value of the shekel.
In recent weeks, the dollar has strengthened significantly, but for the last several years the dollar was very weak against the shekel, with the Israeli currency rising to as high as NIS 3.25, after a low of about NIS 4.6 ten years ago. The high-value shekel was the result of several trends, one of them the relatively higher interest rates the Bank of Israel had been paying.
As a result, foreign currency flowed to Israel, seeking to be converted into shekels – and the Israeli currency appreciated considerably. This situation was very unfavorable to Israeli exporters, who got fewer shekels for the set number of dollars or euros they could charge for their products.
In order to “mop up” the excess dollars and temper the shekel's appreciation, the Bank of Israel has intervened strongly, buying ever larger amounts of dollars. In recent months, as foreign investors begin to pour money into deals involving the Leviathan and Tamar gas fields, the issue has come to the fore.
With the increase in the dollar's value, the Bank has been able to ease off on the purchase of dollars somewhat, the purchases are continuing. As a result, the Bank's dollar holdings fell $220 million in December, and now stands at $86.1 billion.