The recent performance of the US dollar (USD) against the Israeli new shekel (ILS) indicates significant dynamics affecting both currencies. Analysts report that the USD has retreated to multi-month lows, influenced primarily by concerns over the Federal Reserve’s independence and potential rapid interest rate cuts. The anticipated Federal Reserve interest rate decision has overshadowed market sentiment, with expectations that a cut could further weaken the dollar.
On the other side, the ILS has demonstrated remarkable strength, reaching its most robust position since late 2022. This appreciation is attributed to reduced geopolitical risks and solid underlying economic fundamentals. UBS has recently revised its forecasts for the USD/ILS exchange rate, predicting that it will decline to around 3.30 by the end of Q3 2025, stabilizing there before dipping further to 3.20 in Q2 2026. This outlook reflects a marked strengthening of the shekel, bolstered by a surge in foreign investment totaling approximately $8.5 billion in early 2025.
Notably, the current USD to ILS exchange rate stands at 3.3372, which is 1.1% below its three-month average of 3.376. The trading range has remained relatively stable, fluctuating between 3.3170 and 3.5127. Such movements suggest a tepid USD outlook amid a strengthening ILS—a trend that market analysts will continue to monitor, especially in light of upcoming inflation data and geopolitical developments.
Moreover, the Israeli market’s response to domestic judicial reforms adds an element of uncertainty. Despite Prime Minister Netanyahu's recent assurances of potential compromise, investor confidence may remain sensitive to evolving political landscapes. Both analysts and economists urge caution, advising businesses and individuals engaged in international transactions to remain vigilant regarding these factors that could affect the USD/ILS exchange rate in the near term.
