Bank of Israel: Shekel performance in the second quarter of 2026

The Bank of Israel released data today regarding exchange rate dynamics, highlighting the strengthening of the shekel amidst a global rise in the dollar.

According to the report, during the second quarter of 2026, the shekel appreciated by approximately 5.9% against the dollar and 6.6% against the euro. The nominal effective exchange rate index showed the shekel strengthening by 6.1% against the currencies of Israel's main trading partners.

Throughout the quarter, the dollar strengthened against most major global currencies, rising by 2.3% against the Japanese yen and 2% against the Canadian dollar. The actual standard deviation of the shekel/dollar exchange rate, reflecting actual volatility, rose by 2.3 percentage points to an average of 10.7%.

The implied standard deviation in over-the-counter shekel/dollar options, indicating expected volatility, rose by 0.2 percentage points to an average of 9.9%. In comparison, implied volatility in emerging market currency options rose by 0.4 percentage points to 10%, while developed markets saw a decrease of 0.7 percentage points to approximately 7%.

Market activity by sector shifted significantly during the quarter:

• Institutional investors (pension funds, provident funds, and insurance companies) increased net foreign currency sales to approximately 13.8 billion dollars, up from 5.3 billion dollars in the previous quarter.

• The business sector shifted to net foreign currency purchases of approximately 12.2 billion dollars, compared to net sales of 1.8 billion dollars in the prior quarter.

• Non-residents moved to net foreign currency sales of approximately 6.4 billion dollars, reversing from net purchases of 6.5 billion dollars.

• The financial sector increased net foreign currency sales to approximately 1.2 billion dollars.

The Bank of Israel purchased foreign currency on a net basis totaling 1.8 billion dollars. The average daily trading volume grew by 8.9% to 17.6 billion dollars, driven primarily by swap and conversion transactions. The relative share of non-residents in trading volume decreased by 4.5 percentage points to 36.2% by the end of the quarter.