The dollar exchange rate continues to descend and is at its peak decline in Israel. On Wednesday, the conversion rate stood at only 3.09 shekels, reaching levels not seen since 2021-2022.
Chief Economist at accounting firm BDO Chen Herzog told Israel Hayom that the sharp decline stems from the strengthening of the shekel, which reflects a decrease in Israel's risk premiums. According to him, this is against the background of the end of the war in Gaza and estimates regarding the weakening of the regime in Iran.
Herzog noted that the strengthening of the shekel indicates the strength of the Israeli economy after the war. According to Herzog, a decline in the dollar rate contributes to a decrease in inflation and to the reduction of the cost of living, since it cheapens the prices of imported products, flights abroad, fuel, and electricity, and also cheapens the costs of raw materials for industry.
However, he emphasized that a low dollar rate also has a negative side: certain damage to high-tech and Israeli exports, since in dollar terms wages in Israel – which are paid in shekels – become more expensive – which harms the competitiveness of exports and industry.
He added that against the background of the low rate, this is an opportunity for purchasing trips abroad and products from shopping sites like Amazon and AliExpress. Regarding the continuation of the trend, Herzog said that the dollar's decline has positive significance because it suppresses inflation and may assist in lowering the interest rate. However, he noted that a decline that is too sharp could harm industry and exports. According to him, the probability that the rate will drop below 3 shekels is low, and in such a case the Bank of Israel is expected to intervene to prevent a further decline.
