Hebrew Economic Newspapers Reveal Reasons for Dollar Weakness Against Shekel Strength Rise

Translation of SadaNews Economics - Hebrew media reports indicated on Tuesday evening that the Israeli shekel continues to rise against the dollar, which has fallen to its lowest level in four years on the local market.

According to the Hebrew economic newspaper Calcalist, as translated by SadaNews Economics, the American currency has dropped below 3.10 shekels for the first time since January 2022, noting a 0.4% decline of the dollar against several major currencies.

It pointed to a 0.4% decrease in the euro, while the British pound fell by 0.3%, and the dollar dropped by 0.5% against the Japanese yen.

It indicated that the U.S. central bank, the Federal Reserve, is set to issue its first decision on interest rates for 2026 this week, and it is expected to keep the interest rate unchanged at 3.75%, the rate it reduced to last December, amidst global market anticipation of the meeting's outcome.

For its part, the Hebrew economic newspaper Globes reported that there are two main factors supporting the rise of the shekel against the declining dollar, especially after the return of the body of the last Israeli prisoner from the sector. It stated that the first factor relates to expectations of an improvement in the geopolitical situation, while the second concerns the global weakness of the dollar amid the rising value of the Japanese yen.

The newspaper also stated, as translated by SadaNews Economics, that the dollar has reached its lowest level in nearly four years after a decrease of approximately 1% compared to the previous exchange rate, noting that since the beginning of the year, the dollar has dropped by about 2% and has lost around 10% of its value against the shekel over the past three years. Compared to the highest level recorded in October 2023 at the outbreak of the war (4.05 shekels per dollar), this represents a cumulative decline of approximately 23%.

The newspaper said: The weakness of the dollar has become evident on the global stage, particularly against the Japanese yen, as over the course of a week, the dollar fell approximately 2.4%, reaching less than 154 yen for one dollar.

According to Kobi Levi, head of market strategy at Bank Leumi in Israel, an exceptional event occurred last weekend that supported the dollar's decline, indicating that during this event, the yen rose sharply amid rumors of possible intervention by the Japanese government, coinciding with the Federal Reserve in New York reviewing interest rates, a step that could indicate a willingness to act in the foreign exchange market.

Levi added: Although these are just rumors, there is a significant state of alert in the market, as the joint activity by the Federal Reserve and the Japanese government to support the yen's rise is an unusual and highly significant event, which, if it indeed occurs, could indicate the Federal Reserve's openness to effectively support a decline in the dollar's value, representing a fairly significant change in the global monetary context.

As for the shekel, Levi points out that it has seen a steady rise over the past year against other currencies and recently reached its highest all-time level, as translated by SadaNews.

The Israeli economist attributes this, according to his statement, to a combination of improving geopolitical conditions and strong fundamental factors, including: a surplus in the current account, assets surpassing liabilities in foreign currencies, the hedging policy followed by financial institutions, and positive capital inflows into Israel.