The weighting of the currencies in the basket used to define the exchange-rate band remains unchanged

19.4.2005
 
The weighting of the currencies in the basket used to define the exchange–rate band remains unchanged
 
The Foreign Currency Department of the Bank of Israel announces that in a routine examination it was found that the difference between the share of each currency in the basket according to which the exchange-rate band is defined and its share of Israel’s foreign trade in 2004 (imports and exports of goods and services, excluding diamonds) was less than 2 percentage points. Consequently, the composition of the currency basket does not need to be adjusted this year. The decision to leave the composition of the currency basket unchanged was reached after consultation with the Ministry of Finance.
The weights of the various currencies in Israel's trade in 2004 and in the currency basket and the differences between them are as follows:
 
      (percentage points)
  $ £ ¥
Composition of trade 64.66 23.93 5.51 5.90
Composition of basket 63.60 24.63 6.08 5.68
Difference 1.06 -0.70 -0.57 0.21
 
In 1995 the Bank of Israel decided, in consultation with the Ministry of Finance, to update the composition of the currency basket annually, on the 30 April, on the basis of the currency composition of trade in the year to that date. If a gap of at least 2 percentage points emerged between the weight of one (or more) of the currencies in the basket and its average share of trade, the composition of the currency basket would be changed to bring it into line with the share of trade.
As a result of that decision, the figures are examined each year, and in 1996, 2000 and 2004 differences were found between the composition of the currency basket and the composition of trade that necessitated changes in the basket. Thus on 30 April 1996 the weight of the dollar in the basket was increased by 3.3 percentage points and the weights of the other currencies were reduced accordingly; on 2 May 2000 the weight of the pound sterling was lowered by 2.1 percentage points and those of the other currencies increased accordingly; and on 30 April 2004 the weight of the dollar in the basket was raised by 4.4 percentage points and the weights of the other currencies cut accordingly. In the other years the differences found did not require the basket to be adjusted.
The currency basket is used to define the limits of the exchange-rate band and also to calculate the representative exchange rate of the NIS.