The USD to ILS exchange rate has been influenced by recent trends in both the US and Israeli economies. As of December 22, 2025, the USD has fallen to 90-day lows near 3.1860, representing a 2.3% drop from its three-month average of 3.2615. This decline reflects a broader weakening of the US dollar, largely driven by expectations of aggressive Federal Reserve rate cuts anticipated in 2026. Following a recent soft US consumer price index, analysts have asserted that the expectations for monetary easing are weighing on the USD, diminishing its relative yield advantage.
On the other hand, the Israeli new shekel has exhibited strength, attributed to various favorable developments. The shekel recently reached a three-year high at 3.212 per US dollar, supported by robust defense exports, increased foreign venture capital investments, and a stable credit outlook from S&P Global. The shift in geopolitical risk perceptions, particularly following the Gaza ceasefire, has further contributed to the ILS's appreciation.
Analysts have noted UBS's significant downward revision of its quarterly USD/ILS forecasts, predicting the pair to reach 3.30 by the end of Q2 2024. This adjustment highlights the impact of improved economic fundamentals in Israel and reduced geopolitical risk premiums. Mixed US economic data, indicating slowing growth yet resilient labor markets, has created a complex backdrop for the dollar, further limiting its upside potential.
Overall, the market indicators reveal a range-bound outlook for the USD/ILS pair in the near term, as the US dollar faces downward pressure from dovish Federal Reserve signals while the shekel benefits from strong domestic and geopolitical factors. Investors should remain attentive to upcoming economic releases and central bank communications, which could influence future movements in this currency pair.
