JERUSALEM, March 14 (Reuters) - Bank of Israel Governor Karnit Flug said that she expects the shekel to remain strong as long as the Israeli economy is strong and that exporters and manufacturers should take that into account.
Flug was asked in a television interview broadcast on Friday about the continued strengthening of the shekel despite the central bank cutting its benchmark interest rate by 25 basis points last month to 0.75 percent, the lowest since November 2009.
The shekel stands at 3.462 per dollar, near its strongest level since August 2011.
The decision, she told Israel’s Channel 2, “was meant to make that process more gradual and give exporters and local manufacturers time to make the necessary adjustments so they can compete in a situation where the economy is strong.”
“I don’t know what a balanced exchange rate would be, but what I am certainly saying is that when we have a strong economy that has a current account surplus (in the balance of payments), that has large investments from foreigners in attractive companies, a process of appreciation is part of this. And manufacturers need to take this into account,” she said.
Israel’s economy grew 3.3 percent in 2013 and a similar pace is projected this year. The current account surplus received a boost when natural gas production began last year at a large offshore field and the country cut back on fuel imports. ($1 = 3.4623 Israeli shekels) (Reporting by Ari Rabinovitch; Editing by Hugh Lawson)