The forces figuring out the shekel-US greenback trade fee are usually not fairly the identical as they had been, in accordance with senior market analysts. The trade fee has risen prior to now twenty-four hours to over NIS 3.16/$, towards the background of declarations by the US administration and the rising worry of a commerce battle between the US and the EU, however prior to now few weeks it has been round NIS 3.14/$ and even decrease. The speed has been at its lowest for 4 years.
The Financial institution of Israel acknowledged this week that within the second half of 2025 the shekel continued to strengthen towards the US greenback, by about 6%, after an analogous fee of appreciation within the first half of the 12 months. Israel’s improved place and the boldness of the markets contributed to this appreciation. Throughout 2025, Israel’s threat premium, as measured by the CDS (credit score default swap) and spreads on dollar-denominated authorities bonds, fell considerably, at first after the Rising Lion marketing campaign towards Iran in June after which once more after the declaration of the ceasefire within the Gaza Strip, till by the tip of the 12 months the premium was solely barely increased than it was earlier than the battle.
As well as, throughout the second half of 2025 worldwide credit standing company S&P upgraded its outlook for Israel’s sovereign ranking to”Steady”. To that may be added the Tel Aviv Inventory Trade, which outperformed different markets, and the strengthening of Israel’s exports in excessive tech and protection.
The shekel-dollar fee is affected by a mixture of inside and exterior components. Regardless of the latest slight weakening of the shekel as fears of a worldwide commerce battle have risen, it seems that native and structural components have turn out to be extra vital currently.
Historically, the principle predictor of motion within the shekel has been the development in inventory indices within the US. It is because Israeli monetary establishments allocate a considerable a part of their investments to abroad markets, however preserve their publicity to overseas trade fluctuations inside a sure restrict. When US markets rise and the worth of the establishments’ greenback property rises with them, their publicity to the greenback will increase and exceeds the restrict. They due to this fact must hedge by promoting {dollars} and shopping for shekels to cowl the publicity. The elevated provide of {dollars} and demand for shekels causes the worth of the shekel in greenback phrases to rise. The result’s a direct correlation: when US markets rise, the shekel strengthens towards the US greenback, and once they fall it weakens. This correlation has diminished lately.
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“The connection will not be as clear because it was
Harel Dotan, head of derivatives, foreign exchange and rates of interest at Menora Mivtachim Insurance coverage, explains that the weakening of the US greenback is a worldwide course of. “It’s a part of the strikes launched by Trump and stems from his want to weaken the greenback with the intention of lowering the large US commerce deficit and strengthening native trade. There are additionally world components. If we take a look at the shekel towards the euro, for instance, we will see that though it has strengthened, it has not finished in order dramatically because it has towards the greenback, for the reason that euro itself has strengthened by 12% towards the greenback prior to now 12 months.”
Meitav chief economist Alex Zabezhinsky says, “This hyperlink, which has existed for years besides in 2023 and partly in 2024, is now not as clear because it was. Usually there was a coefficient such that for each rise of 1% within the S&P 500 Index the shekel strengthened by 0.3%, however now the shekel has strengthened by rather more.”
Why is that? “It could possibly be that there are different forces shopping for shekels moreover the monetary establishments, and that that has led to appreciation of the shekel past what derives from the rise in US inventory markets. These forces could possibly be overseas monetary establishments, Israel’s enterprise sector, and so forth,” Zabezhinsky explains.
As well as, he factors out that the phenomenon could possibly be because of the Israeli establishments themselves. “They might be shopping for extra shekels as a result of they’ve determined to hedge their overseas foreign money publicity much more due to the appreciation of the shekel. Suppose that they maintained an publicity of 20% and determined to cut back it to 18% – that might have an instantaneous affect. However we’ll solely know looking back what the precise publicity was.”
One other index takes middle stage
Along with that, Zabezhinsky factors to a brand new development: a big strengthening of the correlation between the shekel trade fee and the MSCI All Nation World Index. He says that this variation will not be coincidental and could possibly be a concrete expression of the truth that “investments by the monetary establishments have shifted away from the US, and this makes a substantial amount of sense.” He makes clear that the US continues to be dominant in most portfolios, however that it’s sufficient for a share to be transferred away from there for the impact to be felt within the overseas trade market.
It is because the establishments have to reply not simply to the US market but in addition to different markets which have risen by greater than the US market lately. Zabezhinsky provides the reservation that the MSCI index itself is about 60% composed of the US market, however factors out that “basically funding used to present the next weighting to the US and I feel that we at the moment are seeing a return to a decrease weighting for the US all around the world.”
Dotan says that the shekel has been unusually robust currently in a manner that exceeds the acquainted correlation with the inventory indices. He means that behind this will likely lie expectations of deep change within the area. “The strengthening of the shekel past the standard correlation might stem from hopes of the collapse of the regime in Iran. Such an occasion might result in a change within the map of threats to Israel.”
Israelis investing much less in S&P 500
In accordance with Dotan, one other issue behind the robust shekel is the fading of the development of funding in funds monitoring the S&P 500 Index. “In 2023-2024 we noticed a robust move of cash to those funds, however prior to now 12 months they’ve achieved decrease returns than common funding tracks,” he says, the reason is that they’re absolutely uncovered to foreign money fluctuations, whereas the Israeli inventory market has risen extra sharply.
Rate of interest minimize not stopping the shekel
The Financial institution of Israel’s determination to chop its rate of interest to 4% two weeks in the past has not halted the appreciation of the shekel. “The hyperlink between the rate of interest and the foreign money has weakened lately,” explains Zabezhinsky, including that “The affect doesn’t come from small adjustments. It could possibly be that if the financial institution had been to chop the rate of interest drastically it will be felt extra.” The central financial institution’s arsenal is due to this fact diminished. “Intervention within the overseas foreign money market will not be acceptable to the US administration,” he says.
Revealed by Globes, Israel enterprise information – en.globes.co.il – on January 21, 2026.
© Copyright of Globes Writer Itonut (1983) Ltd., 2026.
