The USD to ILS exchange rate has recently been under pressure due to a confluence of factors affecting the US dollar and the Israeli shekel. Analysts note that the US dollar has seen a notable decline, reaching multi-month lows driven by the Federal Reserve's dovish stance on interest rates. Expectations of aggressive rate cuts in 2026 have led to a weaker USD, compelling traders to reduce their holdings in favor of riskier assets. As reported, the recent spike in jobless claims and mixed economic data have compounded the challenges facing the dollar.
In contrast, the Israeli shekel has demonstrated significant strength, appreciating approximately 9.3% against the US dollar in recent months. Contributing to this trend is a decrease in Israel's inflation rate, which fell to 2.5% in September, potentially positioning the Bank of Israel to consider interest rate cuts. Furthermore, improved investor sentiment and a reduction in geopolitical risk premiums, particularly following the recent ceasefire in Gaza, have bolstered the shekel's standing.
Current data indicates that the USD to ILS exchange rate is trading at 3.2230, which is 1.7% below its three-month average of 3.2793, within a stable range of 3.2003 to 3.3576. UBS has revised its forecasts for the USD/ILS lower, anticipating further strengthening of the shekel based on these favorable economic indicators.
Overall, the combination of a dovish Federal Reserve, fluctuating US economic performance, and strengthening fundamentals in Israel suggests a continued downward path for the USD against the ILS, as expectations evolve and market conditions shift. Investors and businesses should remain attentive to upcoming economic data and geopolitical developments, as these will be crucial in shaping the exchange rate landscape in the months ahead.
