Why The Dollar Is So Weak Against The Shekel – And What Might Come Next

The Dollar vs. the Shekel: Why We’re at 3.09 – and What It Means for Buyers

If you’ve been watching the USD/ILS exchange rate recently, you’ve probably noticed something striking: the dollar is trading around 3.09, its weakest level against the shekel in roughly four years. For anyone moving money into Israel – especially property buyers – this matters a lot.

So what’s going on? Why is the dollar so weak, what happened last time we were here, and how low could it realistically go?

Why Is the Dollar So Weak Right Now?

Exchange rates are never driven by just one factor. What we’re seeing today is the result of several forces lining up at the same time.

1. Shekel strength (not just dollar weakness)

Despite Israel’s challenges over the past year, the shekel has historically been one of the stronger emerging‑market currencies. Israel runs long‑term current account surpluses, attracts foreign investment (particularly in tech and real estate), and benefits from consistent foreign‑currency inflows.

When uncertainty eases even slightly, the shekel tends to rebound quickly.

2. Interest rate expectations in the US

The dollar strengthened sharply in previous years on the back of high US interest rates. Recently, markets have begun pricing in rate cuts in the US.

When investors believe US rates are heading lower:

• Dollar assets become less attractive

• Capital starts flowing out of the dollar

• The dollar weakens against currencies like the shekel

• 
  

3. Reduced “panic premium” in Israel

Currencies often overshoot in times of fear. When risk is high, investors demand a premium to hold shekels, pushing USD/ILS higher.

As markets adjust and panic fades, that premium unwinds – and the shekel strengthens, sometimes very quickly.

What Happened Last Time USD/ILS Was Around 3.09?

The last time we saw levels in this area, the backdrop was surprisingly similar:

• Strong capital inflows into Israel

• A relatively weak dollar globally

• Confidence (or at least stability) returning to markets

At that point, many people assumed the shekel would just keep strengthening. But currencies rarely move in straight lines.

Why did the dollar recover last time?

A combination of factors reversed the trend:

• Global risk events pushed investors back into the dollar as a safe haven

• Interest rate differentials shifted, favouring the US

• Exporter pressure increased, with Israeli exporters converting fewer dollars at very strong shekel levels

• In some cases, central bank signalling or intervention helped slow the shekel’s rise

The key lesson? Even when the shekel is very strong, it doesn’t stay there forever.

Geopolitical Risk: What If the U.S. Strikes Iran – or Doesn’t?

Another major factor influencing the USD/ILS exchange rate right now is regional geopolitical risk, particularly surrounding the possibility of a U.S. strike on Iran.

Markets tend to react to geopolitics before anything actually happens. It’s the uncertainty itself that moves exchange rates.

If the U.S. Does Strike Iran

In the event of a U.S. military strike, even a limited one, we would likely see a classic “risk‑off” reaction in global markets:

• Investors rush into perceived safe‑haven assets such as the U.S. dollar, U.S. Treasuries and gold

• Emerging‑market and regional currencies, including the shekel, often weaken temporarily

• USD/ILS could move sharply higher in a short period of time, even if Israel is not directly involved

In addition, any escalation that threatens oil supply routes (particularly the Strait of Hormuz) could push oil prices higher, increasing global inflation concerns. Higher inflation expectations make central banks less eager to cut rates, which historically supports a stronger dollar.

The key point: in the short term, a strike would most likely strengthen the dollar and weaken the shekel, at least initially.

If the U.S. Does Not Strike / Tensions Ease

If tensions fade, diplomacy takes centre stage, or markets conclude that escalation is unlikely, the opposite dynamic often occurs:

• The dollar loses its safe‑haven premium

• Risk appetite returns

• Stronger currencies like the shekel tend to recover

In these scenarios, USD/ILS often drifts back toward its underlying trend, driven again by interest rates, capital flows and economic fundamentals rather than fear.

Why This Matters

Geopolitical headlines can cause sudden and unpredictable FX moves that have nothing to do with long‑term value. For anyone buying property or planning large transfers, this kind of volatility can easily outweigh weeks or months of slow exchange‑rate movements.

How Low Could the Dollar Go This Time?

This is the question everyone asks – and the honest answer is: no one knows for sure.

That said, there are some important guideposts:

• Levels below 3.10 start to create real pain for Israeli exporters

• At very strong shekel levels, natural buyers of dollars tend to appear

• Historically, moves below these areas have been difficult to sustain for long periods

Could we see 3.05 or even 3.00? It’s possible, especially if:

• US rate cuts come faster than expected

• Global markets remain calm

• Capital inflows into Israel continue

But history suggests that betting on endless shekel strength is risky.

What Does This Mean for Property Buyers?

For overseas buyers purchasing property in Israel, a strong shekel cuts both ways:

• It makes property more expensive in dollar terms

• It increases the risk that the rate could move against you between contract signing and payment

This is exactly why many buyers choose to:

• Lock in rates using forward contracts

• Structure transfers in stages rather than all at once

• Get advice early, before signing anything

  
  

Final Thought

The current USD/ILS level feels extreme because it is. History shows that these moments often create both opportunity and risk.

Whether you’re buying property, planning a large transfer, or simply watching the market, the most important thing is not trying to “time the bottom” – but understanding your exposure and managing it properly.

If you’d like to talk through what this exchange rate environment means for you, we’re always happy to help.