The Israeli shekel (currency code: ILS/NIS) is advancing toward NIS 3.07 per US dollar, a near 30-year high. This level, not reached since the 1990s, appears to be driven by improving geopolitical sentiment and a weakening US dollar on global markets, particularly against the Japanese yen, Globes noted.

On January 27, the Bank of Israel set the exchange rate at NIS 3.104 per US dollar, down 1.052%. The shekel has appreciated approximately 2% against the dollar since January 2026 and roughly 10% over the past three years.

Most dramatically, the currency has strengthened 23% since trading at NIS 4.05 per US dollar following the October 2023 war outbreak.

The shekel’s strengthening creates challenges for exporters, particularly defence companies enjoying strong order flows but operating with lower profitability than high-tech firms. Most contracts are denominated in foreign currency, meaning appreciation reduces shekel-denominated revenue despite widespread hedging practices.

This appears particularly problematic given that the rise of the shekel appears to be a result of not just a weakening dollar but internal factors in Israel.

Bank Leumi's head of markets strategy, Kobby Levi, highlighted an exceptional weekend event that accelerated dollar depreciation globally. "As part of the event, the yen strengthened sharply amid rumors of intervention by the Japanese government, and at the same time, the New York Federal Reserve conducted a rate check - a move that may indicate a willingness to act in the foreign exchange market," Levi told Globes.

He asserted that combined US Federal Reserve and Japanese government activity to support yen appreciation would represent "a fairly significant change in the global monetary context."

The shekel's strength reflects more than dollar weakness. Levi identified "strong fundamental forces" including a current account surplus, excess foreign currency assets over liabilities, institutional hedging policies, and positive capital flows to Israel. The currency recently reached an all-time high against the basket of currencies.

Mizrahi Tefahot Bank chief markets economist Ronen Menachem attributed dollar weakness to US-Europe tensions, Federal Reserve independence concerns, and anticipated US interest rate cuts. Bank Hapoalim chief financial markets strategist Modi Shafrir identified shifting institutional behaviour as critical.

"We saw that institutional investors sold $7.5bn" in the first three quarters of 2025, he stated publicly, contrasting sharply with the $35bn they purchased between 2022 and 2024.