The Exchange-Rate Band vis-א-vis the Currency Basket is Abolished

The Prime Minister Mr. Ariel Sharon, the Minister of Finance Mr Binyamin Netanyahu, and the Governor of the Bank of Israel Professor Stanley Fischer decided that with immediate effect the exchange-rate band of the NIS vis-א-vis the currency basket is abolished.
 
This step has been taken to remove the last vestige of a policy pursued in the past in which the exchange rate of the NIS against the currency basket could not cross over the limits of the band, which for several years have had no practical effect.
 
Since 1997 the Bank of Israel has not needed to intervene to protect the band, despite the fact that since then it has undergone various changes that made it a very wide band (currently with a width of more than 60 percent), and in effect the exchange rate moves freely, without the need for intervention.
 
The Prime Minister’s Office, the Ministry of Finance and the Bank of Israel emphasize that today’s step is a technical one being taken as part of the gradual and continuous process that started more than ten years ago.
 
The abolition of the band makes no difference at all to the trade in foreign currency, and is intended mainly to enable Israel’s foreign-currency market to be classified as a free market, similar to markets world wide. This definition is of importance in particular for the international financial institutions and for foreign investors in Israel.