Israel's economy is being flooded with dollars, driving a sharp strengthening of the shekel and raising concerns about potential long-term damage to exports, jobs and growth.
The dollar has fallen from an average of 3.7 shekels in April 2025 to about 3.1 in April 2026 — a roughly 16% drop, marking one of its steepest declines against the shekel since 2008.
Economists say the shift reflects a persistent surplus of dollars entering the economy, largely driven by strong exports from the tech sector and rising foreign investment. In 2025 alone, foreign investment reached about $39 billion, up from $25 billion the previous year, increasing demand for shekels and pushing its value higher.
While a stronger shekel helps lower the cost of imported goods, overseas travel and inflation — currently around 2% instead of an estimated 3% without the currency shift — it is weighing heavily on exporters and companies that earn in dollars but pay expenses in shekels.
Industries including manufacturing and tech are particularly exposed. Companies report declining profitability, and surveys suggest many are considering moving production abroad or reducing hiring. About 40% of exporters and 55% of tech firms say they may expand operations outside the country.
The imbalance is also being reinforced by institutional investors, such as pension funds, which use hedging tools that increase demand for shekels and further strengthen the currency.
Business leaders are urging intervention, including potential dollar purchases by the central bank or policy changes to ease pressure on exporters. However, the Bank of Israel said interest rates are not intended to target specific markets and warned that premature rate cuts could undermine efforts to control inflation.
Despite the benefits for consumers, economists warn the surge of dollars and the weakening of the U.S. currency against the shekel could pose broader risks, as prolonged pressure on exporters may ultimately affect employment, tax revenues and overall economic stability.