How Central Banks Fight Currency Speculation

On June 4, 2026, the Bank of Israel made a rare currency market intervention—buying $801 million to counter what it described as irregular volatility and possible speculative trading. The shekel had strengthened 4% in two weeks, driven largely by hedge funds exploiting the carry trade: borrowing cheaply in yen or euros to park money in high-yielding Israeli assets. This episode unpacks the mechanics of sterilized intervention, why central banks sometimes fight their own currency's strength, and who wins and loses when they do. We explore the two-step dance of buying dollars while selling bonds to neutralize inflation risk, the political economy of favoring exporters over consumers, and how oddly specific intervention amounts send their own message to speculators.