Israel’s shekel has hit its strongest level against the US dollar in three decades, a counter-intuitive signal after more than two years of regional conflict. According to Israel.com, the representative rate was set at 3.068 on February 12, 2026 — the dollar’s lowest mark since November 1995. The trend has since accelerated: JNS reports the shekel touched 2.90 per dollar, its strongest reading since October 1993, an appreciation of 9% year-to-date.
The pace is striking. Ynetnews notes the dollar has fallen from an April 2025 average of 3.7 shekels to roughly 3.1 a year later — a drop of about 16%.
Capital flows changing scale
The main driver is foreign capital. Net inflows reached $39 billion in 2025, up from $25 billion the previous year, according to JNS. Domestic institutional investors are also rebalancing portfolios aggressively: $13.3 billion in net foreign-currency sales in the fourth quarter of 2025 alone, the highest ever recorded, per Globes.
The macro backdrop reinforces the move. The IMF projects Israeli growth at 3.5% in 2026, outpacing every G7 economy including the US (2.3%) and the euro area (1.3%), CNBC reports. Israel’s debt-to-GDP ratio of 69.8% sits well below the G7’s 123.7% .
The shekel appreciation is a reflection of the strong economy and the strong balance of payments. So overall, it’s good for the Israeli economy. — Modi Shafrir, chief strategist, financial markets, Bank Hapoalim
A double-edged blade
Disinflation is the most immediate benefit: inflation has returned inside the Bank of Israel’s 1-3% target band, sitting near 2% instead of the estimated 3% it would have reached without the currency shift, Ynetnews reports. The flip side is unmistakable. Exporters earning in dollars — particularly the technology sector that defines Israel’s global brand — are facing margin compression.
Forecasters remain bullish on the shekel. Israel Discount Bank sees the pair in a 3-to-3.12 range by end-2026, sharper than the Bloomberg consensus. Tamir Hershkovitz of Ayalon Insurance and Finance goes further:
We have seen how much the Israeli economy and the shekel have emerged strengthened from significant events. The direction is clear — below NIS 3/$, and this will happen much faster than we think. — Tamir Hershkovitz, SVP and investment division director, Ayalon Insurance and Finance
A more cautious reading
Not every analyst credits Israeli strength alone. Asher Blass, former chief economist at the Bank of Israel, points out that “the dollar is weak in general” and that the shekel’s gains against the euro are far less pronounced. Idit Moskovich of First International Bank concurs: Israel’s risk premium is narrowing, but the dollar is also losing ground against the global currency basket — albeit with less force than the local move suggests.
Then there is the geopolitical wildcard. Bank of Israel governor Amir Yaron has said growth could rebound to 5.5% next year if regional conflicts ease — a scenario that would push the shekel even lower against the greenback, intensifying the squeeze on exporters.
