After strengthening in recent months, the shekel continues to weaken against the world’s major currencies over the past week. On the foreign exchange market yesterday, the representative shekel-dollar rate was set 1.191% higher from Tuesday, at NIS 2.973/$, and the representative shekel-euro rate was set 1.041% higher, at NIS 3.435/€. The shekel has weakened against the basket of major currencies for eight consecutive days.

The main factor is the sharp falls on Wall Street Israel’s institutional investors maintain a fixed level of exposure to foreign currency - about 20% on average. Since a huge portion of the public's money is invested in overseas stocks, an automatic mechanism has been created: when US stock markets rise, the value of the institutional investors' dollar-denominated stocks soars, which threatens to push their percentage of exposure to foreign exchange beyond the target they set.

To balance the situation and maintain a stable exposure level of about 20%, the institutional investors are forced to sell dollars in the market. The equation is as follows: every 1% increase in the leading Wall Street indices requires the institutional investors to sell an estimated $2 billion to hedge the risk, and vice versa. When the US stock market rose sharply, selling pressure flooded the local market with dollars. In recent days, the trend has been reversed, and the institutional investors are forced to buy dollars.

The depreciation of the shekel also comes after, for the first time since 2022, the Bank of Israel resumed purchasing foreign currency. This week, it was revealed that the bank intervened directly in the foreign exchange market during May to the tune of $800 million, and market sources believe that these purchases continued into June.

To this should be added the speech of the Governor of the Bank of Israel, Prof. Amir Yaron, at the Eli Hurvitz Economics Conference. The Governor hinted that as the inflation environment declines and approaches the lower annual limit (1%), following the strengthening of the shekel, this will justify an expansionary monetary policy at a faster pace. The market responded to the signal immediately, and that same day the shekel began to weaken against the dollar. As it transpired, at the time of the speech, the Bank of Israel had already intervened in the forex market in practice.

There are also other factors such as the increase in Israel's risk premium following the escalation on the Lebanese border, and with Iran.

Published by Globes, Israel business news - en.globes.co.il - on June 11, 2026.

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