The dollar rose sharply against the shekel on Monday morning, moving close to the NIS 3 level, last seen on April 21. Analysts said the move reflects both a weaker shekel and a broader rebound in the dollar globally.
Ronen Menachem, chief economist at Mizrahi Tefahot, said the shekel is falling against both the dollar and the euro because markets are reading the U.S.-Iran understandings cautiously from Israel’s perspective, while U.S. stocks are also sliding, a setting in which the shekel tends to weaken. He noted that the Nasdaq fell 2.1% over the past week and 1.3% yesterday. Menachem said Bank of Israel intervention in the foreign-exchange market is possible again, after it bought about $800 million in May, following the governor’s remarks at an economic conference and a one-off FX purchase announcement. He added that the dollar is strengthening worldwide as investors expect the Federal Reserve to raise rates by 0.25% to 0.75% by year-end.
Menachem said the shekel’s current weakness comes after it had already reached NIS 2.8 per dollar, so the currency is still starting from a relatively strong level. He said the approach to NIS 3 may cause traders to pause, and that geopolitical developments and Bank of Israel actions could keep pushing the shekel weaker in the near term, though uncertainty remains high. He also pointed to the next Bank of Israel interest-rate decision on July 6, along with a new economic forecast and path for rates, as another source of market tension.
Ran Sini, chief economist at Ultra Finance, said NIS 3 may become the market’s short-term balance point. He said the move is driven by three factors: institutional investors rebalancing after the dollar’s sharp drop in May and reducing dollar sales, the U.S. interest-rate environment that still favors the dollar, and technical correction after the dollar was heavily oversold around May’s lows. Sini said that if the current momentum continues, the dollar could settle around NIS 3 within days, and by the end of the week trade in a range of NIS 2.98 to NIS 3.04.
