Shekel gains despite higher c.bank forex purchases

By Steven Scheer

JERUSALEM, July 14 (Reuters) - Israel's shekel ILS= gained 1.5 percent against the dollar on Monday, after selling emerged in the dollar once the Bank of Israel had completed its daily purchase of foreign currency.

Last Thursday, the shekel reached a nearly 12-year peak of 3.20 to the dollar, prompting the central bank to raise its daily foreign exchange purchases to $100 million from $25 million.

The action sent the dollar up nearly 6 percent by Friday afternoon to 3.38 shekels, the level where it opened on Monday.

"People waited for the ($100 million) purchase," said a dealer at Union Bank. "After everyone thought the Bank of Israel had bought enough dollars, we saw a lot of sellers.

"The market always wins versus the central bank," he said, adding it will take a few weeks to see the true impact.

Another dealer at a foreign bank in Tel Aviv said Israeli exporters sold as much as $300 million in dollars to more than offset the buying by the Bank of Israel, sending the dollar down throughout the session.

The shekel's official rate was set at 3.3290 per dollar, compared with Friday's rate of 3.38. It weakened slightly to 3.3430 in late trading.

Most observers believe the shekel will continue to strengthen but at a slower pace and with more volatility.