The shekel is strengthening today and is trading at its strongest rate in over three years against the dollar and nearly three years against the euro. In afternoon inter-bank trading the shekel is 0.09% lower against the dollar at NIS 3.212/$, and 0.14% lower the euro at NIS 3.737/€.
Yesterday, the representative shekel-dollar rate was set 0.588% lower from Friday by the Bank of Israel, at NIS 3.210/$, and the representative shekel-euro rate was set 0.582% lower, at NIS 3.740/€.
Mizrahi Tefahot Bank chief strategist Yonie Fanning said that the strengthening of the shekel was due to several factors including talks between Israel, the US and Qatar about rebuilding relations after Israel’s attack on Doha in September. Fanning also cites US economic factors.
He said, “The expectation of a US interest rate cut, on the one hand, and the relative stability here, continues to lead to an interest rate gap that makes the shekel more attractive. At the same time, in terms of shekel liquidity, the continued gains on Wall Street, into the weekend, are leading to a moderation in increases in dollar liquidity, even for several-month periods, which also support the shekel exchange rate.”
Interest rate differentials are expected to widen
Bank Hapoalim chief strategist Modi Shafrir, chief strategist told “Globes,” “The shekel-dollar exchange rate has been strengthening sharply again in recent days, supported by the renewed rise in US stock indices (close to record levels), the fundamental forces supporting a ‘strong shekel’ (see also the numerous reports on a significant increase in the volume of investments by foreign venture capital funds in local startups, as well as a significant (and expected) increase in the volume of defense exports), and apparently also due to an increase in the volume of hedging by local institutional bodies.”
In his weekly review, Shafrir wrote that he believes the Bank of Israel will not cut the interest rate in the next decision in January and that the pace of interest rate cuts later in 2026 will be very measured, “Due to the expected good growth in 2026, the ‘very tight’ job market leading to higher wage pressures, and the ‘dovish’ tone taken by senior Bank of Israel officials – the market is pricing in an interest rate level of about 3.57% at the end of October 2026, similar to our estimate of an interest rate of about 3.50-3.75% at the end of 2026”.
Ronen Menachem, Chief Markets Economist at Mizrahi Tefahot Bank, sees the strengthening of the shekel as a continuation of a trend from recent days. “Government deficit data surprised favorably, and are an indication of the strength of the economy on the revenue side. This explains the strengthening of the shekel against the euro as well.”
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Menachem also expects a 0.25% interest rate cut in the US this coming Wednesday. “While in Israel the likelihood of an interest rate cut next month is lower and the increases recorded by futures contracts in the US, leads to the conversion of foreign exchange into shekels by local entities, with exposure to foreign exchange and overseas stocks.”
Published by Globes, Israel business news – en.globes.co.il – on December 9, 2025.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.
