Israeli Shekel Strengthens as Dollar Falls Below 3 Shekels After Three Weeks

After three weeks, the US dollar has dropped below 3 Israeli shekels, continuing a trend of shekel appreciation that began at the start of 2026. Since January, the dollar has lost approximately 5.5% against the shekel, while the euro has weakened by about 7.6%. In the second quarter alone, the shekel strengthened by 5.9% against the dollar and 6.6% against the euro. As of the morning of August 5, 2026, the euro traded around 3.45 shekels.

This strengthening of the shekel is attributed to several factors, including reports of progress toward a deal with Iran and expectations of the reopening of the Strait of Hormuz, which have reduced regional risk premiums. Additionally, Brent crude oil prices fell about 5% to around $79 per barrel. Financial analysts note that this regional calm reduces the "war premium" attached to the shekel during times of tension and encourages global risk appetite, benefiting local assets. This sentiment was reflected in sharp gains in Asian stock markets and Wall Street the previous evening.

Locally, a significant development was the sale of the biotech company BioCatch in a deal exceeding $2 billion, which increases foreign currency supply in Israel and supports the shekel's strength. Experts also highlight the broader weakness of the US dollar globally, which is near a six-week low against major currencies, while the euro trades above $1.15. Therefore, the dollar's decline against the shekel results from both the shekel's rise and the dollar's global weakness.

The shekel's appreciation helps lower the cost of imported goods, raw materials, and overseas travel, potentially easing inflation in Israel. However, it negatively impacts exporters and companies earning mostly in dollars but incurring expenses in shekels. A survey by the Central Bureau of Statistics and the Bank of Israel found that nearly one in five Israeli businesses reported being hurt by the shekel's strengthening in the past six months, especially in export and high-tech sectors.

Looking ahead, analysts expect the shekel's overall strength to continue but anticipate a period of stabilization or a modest rebound in the dollar due to market dynamics and profit-taking by traders. The future direction depends on two key scenarios: if the Iran deal materializes, the shekel may continue strengthening with the dollar staying below 3 shekels; conversely, strong US employment data could revive expectations of higher interest rates, supporting the dollar and pushing it temporarily above the threshold. Experts agree that the shekel's medium- and long-term strengthening trend is likely to persist, making any temporary dollar gains an opportunity to sell dollars.