The price of the shekel rose significantly against major currencies today, after the signing of a ceasefire agreement for the release of Israeli hostages by Hamas. The representative exchange rate of the shekel to the US dollar was set at 1.13%, at 3.2420 shekels/dollar, and the representative exchange rate of the shekel-euro was set at 1.32%, at 3.7635 shekels/euro. But even before signing the agreement with Hamas, the shekel won the title of “strongest currency” last week. According to Bloomberg, the shekel was the best-performing currency among thirty major currencies, while according to an analysis by the Bank of Israel, against the weighted average of a basket of 29 currencies of Israel’s major trading partners (the “nominal effective exchange rate”), the shekel is at its strongest levels ever. How far can you go?
Tamir Hershkowitz. The executive vice president and head of investments at Ayalon Insurance Company estimates that next year, the shekel will reach 3.1 shekels to the US dollar, and that within two years the exchange rate will fall to less than 3 shekels/dollar. “If we look at the past 20 years, the trend line is very clear,” he explains. “Twenty years ago, the price of the shekel to the dollar was 4.7 shekels/dollar. Since then, the trend of the shekel’s appreciation has become very clear.”
What does this trend stem from? One factor is currency hedging. Chief market strategist at Bank Hapoalim, Modi Shefrier: “Because of the need of institutional investors to hedge exchange rate risks on foreign investment, shekel exchange rates are coordinated with stock indices abroad. If these indices rise, the shekel strengthens.”
The story does not end there. “Beyond financial explanations there are real economic explanations,” says Hershkowitz. He added: “There are huge investments by local and foreign investors, both financial and real, in the local economy.” “We have a structural current account surplus, and it is expected to rise if the war ends,” Shafir says. “There is direct investment by foreign entities in Israel on a very large scale, especially in the technology sector.”
In the background is Israel’s geopolitical position. “Here we have a major geopolitical event, with far-reaching changes for Israel vis-à-vis Iran, Lebanon, Syria, and perhaps later with Saudi Arabia as well,” Hershkowitz says. “And in the long term, we saw that the trend toward strengthening the shekel continued even when we were at the height of the fighting, when the end of the war seemed a long way off.”
“Last night’s agreement paves the way for a new Middle East, and in the new world order, Israel has a clear technological and military superiority over the countries of the region, and the alliance with the United States is stronger than ever. We see an end to the boycott and sanctions against Israel, and a great opportunity to reach a normalization agreement with Saudi Arabia. We expect the stock market to continue to rise. The next rise will be in bonds, which will benefit from lower interest rates. In the few months “The next one.”
Published by Globes, Israel Business News – en.globes.co.il – on October 9, 2025.
© Copyright Globes Publisher Itonut (1983) Ltd., 2025.
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