Shekel weakens sharply amid security, political uncertainty

The shekel, which has appreciated sharply in recent weeks is weakening today. In afternoon inter-bank trading the shekel is 1.16% higher against the dollar at NIS 3.451/$, and 0.57% higher against the euro at NIS 3.978/€.

Yesterday, the Bank of Israel set the representative shekel-dollar rate down 0.293 from Friday, at NIS 3.404/$, and the representative shekel-euro rate was set 0.962% higher at NIS 3.936/€.

Mizrahi Tefahot chief markets economist Ronen Menachem says, “Due to the strong increases recorded by both the stock markets and the shekel in recent weeks, and because of the opposite trends of the strengthening of the dollar worldwide and increases on Wall Street in the past two days, it seems the market is now reacting to local events, including question marks regarding the security environment in the near future.

“I would also attribute the lack of clarity on the implications of the tariffs on the Israeli economy and concern about developments in economic relations with EU countries. So far, these are only concerns and it is not yet possible to point to any clear data that shows this in practice. In general, the current devaluation of the shekel cannot be separated from the major volatility it has shown since the start of the year. The shekel has depreciated 2.4% against the dollar in the past month – a reasonable figure. Combined monitoring of both the stock markets, the foreign exchange market, and risk premiums in the economy will be needed before it can be ascertained that we are facing a change in trend.”

Poria Finance chairman Or Poria agrees with Menachem. He says, “The leading currencies are trading stronger against the shekel this morning, due to local developments including the dismissal of the Attorney General, the dismissal of the chairman of the Foreign Affairs and Defense Committee, and the worsening of tensions between the military and political echelons regarding the continuation of the fighting in the south. This is compounded by the increase in the probability of escalation and expansion of the security conflict.

“However, there is no change in the medium and long-term estimates, according to which the shekel’s strengthening trend is expected to return. Accordingly, any decline in the shekel’s exchange rate against the major currencies may constitute a buying opportunity.

“At the same time, there are declines in stock exchange indices in Israel, contrary to the global trend. However, it is important to note that these declines come after a period of sharp increases, which resulted from a lack of significant pricing of the local stock market and a significant fall in the risk premium.”

Published by Globes, Israel business news – en.globes.co.il – on August 5, 2025.

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