Israel hedging of foreign debt at $2.5 bln this year

JERUSALEM, Aug 10 (Reuters) - Israel has spent $2.5 billion this year on hedges to protect its foreign debt from exchange rate fluctuations, more than three times what it spent in all of 2007, the Finance Ministry said on Sunday.

In a bid to reduce its dollar-denominated debt, the ministry has made deals using dollar-shekel forwards as well as dollar-shekel and dollar-euro swaps.

Israel's foreign currency debt totalled $31.1 billion at the end of 2007, $27.4 billion of which is now dollar-based.

The ministry said in a statement it would continue to act to reduce the exposure of foreign debt as market conditions change.

Since the beginning of 2008, the shekel has appreciated about 6 percent against the dollar -- although its gains had reached some 18 percent last month.

The ministry said that transactions of swapping 10-year dollar debt for shekel-denomninated debt has amounted to $750 million, while swapping dollar debt for euro debt was $500 million. Buying dollar-shekel futures has totalled $850 million.

(Reporting by Steven Scheer; Editing by Jason Neely)