The shekel opened the forex trading week sharply weaker although its losses moderated slightly in early afternoon inter-bank trading. The shekel is currently 0.47% higher against the US dollar at NIS 3.603/$ and 0.89% higher against the euro at NIS 4.094/€. This is a major change in trend from late April, mainly due to the security escalation as the Israeli cabinet has decided to expand the war in Gaza.
Mizrahi Tefahot Bank chief economist Ronen Menachem explains that today’s depreciation is not due to global trends but rather domestic developments. He says, “The shekel is weakening due to increasing security tensions, expanding activity in Gaza, statements by the Houthis and Iran, and its recent relatively gains from NIS 3.81/$ to $3.60/$. The dollar worldwide has actually weakened, which reinforces the assumption that the shekel’s depreciation is clearly due to local matters.”
Prico CEO Yossi Fraiman expresses similar sentiments, “The dollar weakened in the US over the weekend following positive economic data, but here in Israel, last night’s security developments, the announcement of calling up reservists, the cancellations by airlines and the fear of an economic crisis, caused increased demand for the dollar and a rapid depreciation of the shekel.” However, Fraiman adds that without major events in the defense arena, the shekel will again strengthen against the dollar.
This is a sharp change from the trend late last month in the foreign exchange market, when the shekel appreciated strongly against the dollar from NIS 3.81/$ to levels of less than NIS 3.60/$ – a level not seen since the beginning of March. This strengthening was perceived by analysts as a response to positive market sentiment and expectations of geopolitical stabilization. Now it turns out that the optimism was premature
Where is the market headed?
Menachem stresses that everything depends on security developments: “There is now a strong correlation between the continued level of the shekel and the security environment. Renewed intense fighting in Gaza, the end of the period of restraint against the Houthis and renewed heating up of the conflict with Iran could lead the shekel up to NIS 3.80/$ or even higher.”
Fraiman believes that without further events, a renewed strengthening of the shekel is expected in the near term: “This week, wage payments are expected in the economy, so companies operating in foreign currency need to convert it into shekels in order to pay salaries, which strengthens the shekel against the dollar.”
Published by Globes, Israel business news – en.globes.co.il – on May 5, 2025.
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