Israeli Shekel Strengthens Against US Dollar Amid Global Market Shifts

The US dollar weakened against the Israeli shekel on Tuesday in the local foreign exchange market, experiencing slight movements against other major currencies and a decline versus the Japanese yen. Locally, the dollar depreciated by 0.4% to trade at 3.013 shekels. The euro saw a 0.1% retreat to 3.45 shekels, and the British pound fell by 0.1% to 4.027 shekels.

Internationally, the euro remained stable against the dollar at $1.147, and the pound showed no significant change, trading at $1.337. In Japan, the dollar weakened by 0.3% against the yen, reaching 156.9 yen. The US Dollar Index, which measures the dollar's value against a basket of major currencies, dipped 0.1% to 100.04 points.

Traders and investors are closely watching an upcoming summit in Washington between US President Donald Trump and Chinese President Xi Jinping. Key discussion topics are expected to include artificial intelligence, the conflict with Iran, tariffs, and rare earth metals. US Treasury Secretary Scott Santens met with Chinese Vice Premier He Lifeng in anticipation of Xi's visit.

Despite the dollar's weakening, Dr. Ilan Gildin, a partner at Carni Family Office, believes that interest rate differentials create a floor for the dollar, limiting the shekel's potential strengthening. He noted that widening interest rate gaps in favor of the dollar exert basic pressure for shekel depreciation through traditional financing channels. The positive yield gap, particularly in short-term maturities, makes holding shekels less attractive and increases foreign exchange hedging costs for Israeli institutional investors managing significant overseas assets.

Gildin also pointed out that the dollar-shekel exchange rate is influenced not only by interest rate differentials but also by the performance of US stock markets and Israel's risk premium. He suggested that if high US interest rates negatively impact Wall Street and prompt institutions to rebalance currency exposures, it could increase dollar demand and put pressure on the shekel.

Yossi Menashe, co-founder and CEO of Altshuler Shaham Financial Services, stated that the shekel maintained most of its strengthening against the dollar during the holiday period. Future movements will depend on US interest rate trajectories and regional developments. He added that diplomatic progress could further reduce the risk premium, while a return to escalation might quickly drive up oil prices and affect markets.