How Does the Shekel Fit in the Global Currency Landscape?
The US Dollar is the world's dominant reserve currency, used in the majority of global trade and held by central banks everywhere. But not all currencies relate to the dollar in the same way. Some are tightly pegged to it; others float freely; some are extremely volatile while others are remarkably stable. Where does the Israeli New Shekel (ILS) sit in this global picture?
This comparison explores how the shekel measures up against other major and regional currencies in terms of dollar exchange dynamics, stability, and economic context.
The Shekel vs. Major Global Currencies Against the Dollar
The following overview compares the general characteristics of major currencies relative to the US Dollar, and where the shekel fits in:
| Currency | Country/Region | Exchange Regime | Volatility vs. USD | Key Driver |
|---|---|---|---|---|
| Israeli Shekel (ILS) | Israel | Free float | Moderate | Tech exports, geopolitics, interest rates |
| Euro (EUR) | Eurozone | Free float | Low–Moderate | ECB policy, European economic data |
| British Pound (GBP) | United Kingdom | Free float | Moderate | Bank of England policy, UK economic outlook |
| Japanese Yen (JPY) | Japan | Managed float | Moderate–High | BOJ policy, global risk appetite |
| Swiss Franc (CHF) | Switzerland | Free float (managed) | Low | Safe-haven demand, SNB interventions |
| Jordanian Dinar (JOD) | Jordan | Hard peg to USD | None | Fixed by central bank policy |
| Egyptian Pound (EGP) | Egypt | Managed float | High | IMF programs, political stability, reserves |
| Turkish Lira (TRY) | Turkey | Free float | Very High | Inflation, political factors, CBRT policy |
The Shekel's Relative Strength: A Modern Success Story
Compared to many emerging-market and regional currencies, the Israeli shekel has been a standout performer over recent decades. Unlike neighbors Egypt and Turkey — which have seen their currencies lose substantial value against the dollar — the shekel has generally appreciated over the long run, reflecting Israel's strong economic fundamentals, technology-driven export growth, and sound monetary policy.
Key reasons the shekel has held up well globally:
- Israel's tech export boom: Billions of dollars in technology export revenues flow into Israel annually, creating constant demand for shekels and supporting the currency.
- Bank of Israel credibility: Israel's central bank has established a strong track record of inflation control and transparent monetary policy, boosting investor confidence in the shekel.
- Foreign currency reserves: The Bank of Israel maintains substantial foreign exchange reserves, giving it the capacity to intervene and smooth extreme volatility when necessary.
- Current account surpluses: Israel regularly runs current account surpluses, meaning more money flows into the country than out — structurally supportive of the shekel.
How the Shekel Compares to Regional Peers
In the Middle East and Eastern Mediterranean region, the contrast between currencies is stark. The Jordanian Dinar is one of the most stable currencies in the world — but only because it is rigidly pegged to the dollar by government decree, not because of free-market confidence. The Egyptian pound has experienced multiple sharp devaluations. The Turkish lira has lost a significant portion of its value against the dollar over recent years due to unconventional monetary policy and high inflation.
Against this backdrop, the freely floating Israeli shekel — while it can experience short-term volatility, especially during security events — stands out as one of the more stable and credible currencies in the region.
What Global Dollar Strength Means for Israel
When the US dollar strengthens globally — as it does during risk-off periods or when the Federal Reserve tightens monetary policy — the shekel, like most currencies, tends to weaken relative to the dollar. This has mixed effects on Israel:
- Positive: Israeli exporters (especially tech firms) earn more in shekel terms from their dollar revenues when the dollar is strong.
- Negative: Imports become more expensive, particularly energy and raw materials priced globally in dollars. This can feed into domestic inflation.
Conclusion
The Israeli shekel occupies an interesting middle ground in the global currency landscape — more stable than most emerging-market currencies, more volatile than the major safe-haven currencies, and stronger than nearly all its regional neighbors over the long run. Understanding how the shekel compares globally helps investors, expats, and businesses put short-term USD/ILS moves into their proper perspective.