Israel FX market: Weaker institutional flows and rising post-election political uncertainty put pressure on the shekel

ISRAEL - Report 04 Nov 2026 by Sani Ziv

The shekel has depreciated by approximately 4.5% against the U.S. dollar since Israel's elections, reflecting investors' concerns about political instability following the election results, as well as some disappointment relative to pre-election expectations. Bank of Israel data show that institutional investors' net FX sales declined sharply, from USD 13.8bn in Q2 to USD 4.4bn in Q3, reducing an important source of support for the shekel. While Israel's strong external position and continued high-tech investment remain supportive, weakness in U.S. technology stocks, rising FX hedging costs and a prolonged period of political uncertainty could contribute to increased shekel volatility and a moderate depreciation in the near term.

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