The shekel's rollercoaster: From record strength to sudden slide

Just thirty days ago, the shekel was riding high. Now it's tumbling, and fast.

In May, the Israeli currency traded comfortably at NIS 2.8 to the dollar. Today it sits at NIS 3 — a dramatic enough swing to make the shekel one of the worst-performing currencies in the developed world this past month. The only currencies that have done worse? The Russian ruble and the Norwegian krone, both hostages to falling oil prices.

Geneva-based financial analyst Sandrine Zimra points to a confluence of factors driving the reversal: a broadly strengthening US dollar, a rising Israel risk premium following the US-Iran agreement, Bank of Israel intervention in currency markets, a Nasdaq slump, and widening interest rate gaps between Israel and the United States. 

Adding fuel to the fire, Israeli financial institutions are reversing an eighteen-month trend in their foreign currency exposure,  a shift that could accelerate the shekel's slide even further.

How Low Can It Go?

Bank of America projects the shekel-dollar rate could reach NIS 3.14 within three months, though the bank advises cutting losses if it falls back to NIS 2.9.

Before anyone treats these forecasts as gospel, a reality check: currency markets are notoriously difficult to predict. Just before Israel launched its bombing campaign against Iran in March, after which the shekel staged a rapid appreciation, Goldman Sachs was telling investors to sell shekels and buy dollars.

The lesson? In the foreign exchange market, today's confident prediction is tomorrow's cautionary tale. The shekel's recent slide may well continue, or it may reverse just as abruptly as it began.