The shekel is strengthening today against the dollar and against the euro. In afternoon inter-bank trading the shekel is 0.18% lower against the dollar at NIS 3.216/$, and 0.17% lower the euro at NIS 3.717/€.
Yesterday the representative shekel-dollar rate was set 1.072% lower from Friday, at NIS 3.23/$, and the representative shekel-euro rate was set 0.794% lower, at NIS 3.736/€.
The shekel has gained more than 10% against the US dollar since the beginning of the year. The dollar, which fell below NIS 3.22/$ this morning, has not traded at such a level in more than three and a half years. The surprising strengthening of the shekel, which stems from optimism on Wall Street on what appears to be a solution to the government shutdown, along with the continued calm in the war zone in Israel, may have a strong impact on the Bank of Israel’s decision on interest rates on November 24.
Reasons for the wave of optimism
First International Bank trading room manager Idit Moskovich says the strengthening of the shekel, “Is a result of a decrease in the pricing of the inherent risks (of Israel) that have clouded the financial markets.” She adds that the apparent solution to the long-term government shutdown in the US is also leading to a change of direction on Wall Street, as are reports of future meetings between Trump and the Syrian president and the Saudi crown prince. Last week, the Nasdaq fell by about 3%, in its weakest week since April.
In Israel, the Tel Aviv Stock Exchange (TASE) has been mixed this month. While the Tel Aviv 35 index has risen by almost 2%, the construction and overseas yield indices fell by 4% and 6%, respectively. All this and weak home sales in Israel by contractors, and a possible cooling in the pace of interest rate cuts in the US.
Bank Leumi head of markets strategy Kobby Levi tells “Globes,” “The shekel has been supported by gains in global stock markets this morning, which likely stem from progress in the process that will lead to an end to the US government shutdown.
“The improvement in Israel’s rating outlook, which did not surprise the market, also adds to Israel’s wave of optimism. All of these join the fundamental forces that have supported the shekel’s appreciation trend for years. (Bank Leumi’s) Economics Department estimates that the average dollar-shekel exchange rate in the next 12 months will be in the range of NIS 3.1-3.3/$, in the main scenario. There are optimistic scenarios whose probability of realization has recently increased slightly, and pessimistic ones that originate mainly in the geopolitical arena.”
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On Friday, the Central Bureau of Statistics will publish the Consumer Price Index for October – the important inflation figure that could pave the way for an interest rate cut. Economists estimate that the October CPI will rise by 0.4%-0.5%.
Among factors supporting the interest rate cut in the upcoming decision, explains Modi Shafrir, Chief Financial Markets Strategist at Bank Hapoalim, is that “The shekel is at record levels and the end of the war lowered Israel’s risk premium. We see this in the Israeli government’s CDS data, and also in the pricing of the government’s dollar-denominated bonds. In addition, the demand constraint for workers in the economy began to ease in October, which is expected to support a reduction in interest rates because it has a cooling effect on inflation.”
“The Bank of Israel will be in no rush”
If there are no major surprises in the October CPI, Shafrir says, “After all, inflation in the economy has already been within the Bank of Israel’s target (1%-3% per year) for three consecutive months. In my opinion, by January, inflation will already fall to the center of the target range. Alongside this, the weakening of demand in the real estate sector also supports cutting interest rates, and similar steps around the world and in the US in particular.”
What could persuade the Bank of Israel Monetary Committee not to cut rates, according to Shafrir, is the job market “which is still very tight,” as well as the economy’s growth rate “which is expected to rise sharply in the third quarter as a result of correcting the contraction in the second quarter, when there was the war with Iran.”
Shafrir mentions that the Bank of Israel is taking a rather cautious approach: “It says there is no need to rush, and such an approach also does not support lowering interest rates. The market estimates a 75% probability of an interest rate cut this month, and I agree with the forecast.”
Rafi Gozlan, the chief economist at the IBI investment house, says “There is no doubt that since the last interest rate decision at the end of September, a large part of the data has moved in the direction of cutting the interest rate this time.” He believes that the CPI to be published on Friday has great weight. “If it rises in a way that changes the picture, it could lead to a wait on the part of the Governor,” he said.
In general, Gozlan adds, there is no pressure in terms of real activity in the economy to reduce the interest rate: “Demand in the job market is strong, so there is no realistic economic reason to give the economy another boost. On the other hand, I estimate that the Bank of Israel also does not want to create an environment of real interest rates that are too high. Also, if inflation falls and you do not cut interest rates, you are restraining economic activity. In my estimation, if the Bank of Israel sees inflation converging to an annual rate of around 2%, it will adjust the interest rate in the economy towards 4%.
Published by Globes, Israel business news – en.globes.co.il – on November 11, 2025.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.
