UBS recently suggested that the Israeli shekel will significantly strengthen against the US dollar. This trend emerges as geopolitical tensions, notably between Israel and Iran, along with ongoing issues with Hamas, begin to wane. Historically, such tensions have heavily influenced the shekel’s performance. Now, with a reduced geopolitical risk premium, the currency is poised for considerable gains.
Recent conflicts pushed the shekel past the 3.80 mark against the dollar. Analysts now expect it to stabilize and appreciate due to Israel’s economic resurgence and strategic monetary policies from the Bank of Israel (BoI). Additionally, the Federal Reserve’s initiation of an easing cycle is likely to further bolster the shekel. UBS projects that the USD/ILS exchange rate will drop to 3.60 by the next quarter’s end and will eventually stabilize at 3.45 by early 2025.
The resilience of Israel’s economy, which has adeptly navigated the impacts of geopolitical disturbances, supports this positive outlook. With tensions easing and supportive monetary policies from both domestic and US sources, the shekel’s strength is a reflection of both current economic health and a favorable future outlook.
Adding to this, Israel’s tech-driven economic sectors continue to attract substantial foreign investment, further supporting the shekel’s position. Additionally, improvements in regional relations, such as recent peace talks and agreements, contribute to a more stable and optimistic economic environment.
In conclusion, UBS predicts a robust economic period ahead for Israel, with a stronger shekel as a leading indicator of recovery and stability. This trend may signal a return to normalcy and a reduced economic vulnerability to external shocks, offering a reassuring sign for investors and policymakers.
