The weighting of the currencies in the currency basket has been changed

2.5.2006
 
The weighting of the currencies in the currency basket has been changed
 
The Foreign Currency Department of the Bank of Israel announces that on May 1, 2006 the currency basket composition was changed.
 
The amounts of the various currencies in the currency basket are as follows:
(in currency units)
Composition of basket $ £ ¥
After the change 0.7412 0.2053 0.0351 7.3307
Before the change 0.7185 0.2228 0.0374 6.9216
 
The weights of the various currencies as of May 1, 2006 are as follows:
(in percentage points)
Composition of basket $ £ ¥
After the change 65.65 22.94 5.68 5.73
Before the change 63.64 24.90 6.05 5.41
Difference 2.01 -1.96 -0.37 0.32
 
Up to June 9, 2005, the exchange rate policy was conducted vis-a-vis the currency basket, which defined the limits of the NIS exchange-rate band. Since the abolition of the exchange-rate band, the basket has not been used as a policy instrument. However the Bank of Israel continues to calculate the NIS representative rate in terms of the basket purely for indicative purposes.
In 1995, it was decided to update the composition of the currency basket at the end of April each year, based on changes in each currency's share in the composition of trade in the year before the update. If there is a gap of at least 2 percentage points 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 is changed to bring it into line with the composition of trade.
In the routine annual examination carried out by the Foreign Currency Department of the Bank of Israel it was found that in 2005 the average weight of the dollar in the currency basket was lower than its share of Israel's foreign trade by 2.01 percentage points. Therefore the composition of the currency basket and the number of units of each currency comprising the basket were updated on May 1, 2006. As of this date, the weighting of the dollar and the yen in the currency basket were increased by 2.01 and 0.32 percentage points respectively, while the weighting of the euro and the British pound were reduced by 1.96 and 0.37 percentage points respectively.
It must be stressed that the change in the currency basket has no effect on the various exchange rates of the NIS against other currencies. The future effect of the change in the basket on the basket's exchange rate is dependent on the trends in foreign currency trading in Israel and on the international markets.