The USD to ILS exchange rate has been trending downward recently, with current levels at around 3.2570, which represents a 2.5% drop from the three-month average of 3.3422. This marks a 90-day low for the pair, having remained relatively stable in a 6.2% range from 3.2570 to 3.4578. Analysts attribute the shekel's strength to several key factors.
A notable development impacting the Israeli New Shekel (ILS) is the recent cooling of inflation in Israel, which fell to 2.5% in September, down from 2.9% the previous month. This decline falls within the Bank of Israel's target range and may prompt considerations for interest rate cuts. Furthermore, the shekel has appreciated approximately 9.3% against the USD in the second quarter of 2025, bolstered by improved investor sentiment and a weakening dollar across global markets.
Market news indicates that geopolitical tensions have eased, particularly regarding concerns of conflict escalation in neighboring regions, further supporting the shekel's appreciation. UBS has also revised its USD/ILS forecasts downward, predicting continued strength for the shekel due to improved economic fundamentals in Israel and reduced geopolitical risk premiums.
Meanwhile, the US dollar is currently facing mixed movements as a 'risk-on' market mood weakens its appeal as a safe haven. Positive developments in US trade relations with major economies like Brazil, Japan, and China have contributed to this climate, softening demand for the greenback. In anticipation of the upcoming Federal Reserve policy announcement and critical inflation data, investors are likely to remain cautious, which could add further pressure to the USD.
In summary, with the shekel benefiting from reduced inflation and geopolitical risks, coupled with the USD's weakening due to a more favorable global investor sentiment, the outlook for the USD/ILS exchange rate suggests a continuation of downwards pressure for the dollar against the shekel in the near term.
