From today, the Bank of Israel will terminate its daily dollar purchasing program of $100 million. On Monday the central bank announced a change in its operational policy in the foreign exchange market to intervene and continue to buy into foreign currency market in the case of unusual movements in the exchange rate.

"As already announced on 3^rd August 2009, the Bank of Israel will act in the foreign exchange market in the event of unusual movements in the exchange rate which are inconsistent with underlying economic conditions, or when conditions in the foreign exchange market are disorderly," said the central bank in an official statement released on Monday. "The new operating policy of the Bank of Israel in the foreign exchange market will provide a better response to the economy's needs."

The central bank said the program of daily purchases of $100 million which began in July 2008 will be ended on Tuesday since the target of increasing the level of foreign currency reserves has been achieved. Foreign currency reserves stood at $52 billion at the end of July, while the target set by the central bank in November was between $40b. to $44b. Following the announcement on Monday the shekel-dollar exchange rate dropped by 1 percent trading at representative rate of NIS 3.87 at the end of the day.

"After reaching the desired level of foreign exchange reserves, the Bank of Israel continued its dollar purchasing program in light of the increased uncertainty of the global economic situation," explained the bank.

The new operating policy does not define a specific direction of activity, which means that the Bank of Israel can both buy and sell foreign currency in response to exchange rate movements. The bank will announce the change in its holdings as part of the monthly publication of the amount of foreign exchange reserves released on the 5^th of every month.

In operating its new intervention policy in the foreign exchange markets, the bank said it will weigh up a number of factors luding: the level of economic activity in general and the export situation in particular, the level of inflation, financial stability and the functioning of the foreign exchange markets