Dollar Officially Drops Below NIS 3.1/$1

(REUTERS/Nir Elias/Illustration)

The U.S. dollar hit a 25-year low against the shekel on Tuesday, officially dropping below the benchmark 3.10 NIS to 1 dollar rate, a threshold the Bank of Israel had hoped to avoid crossing. The euro also dropped sharply against the shekel and was traded on Tuesday at an exchange rate of NIS 3.511 to 1 euro.

At the end of official trading, the Bank of Israel set the dollar to NIS exchange rate at $1 to 3.09 NIS. The dollar lost -0.387% of its value in total against the NIS on Tuesday.

Despite the development, the Bank of Israel has avoided intervening in the market and BOI Governor Prof. Amir Yaron has remained ambiguous about possible future intervention.

A strong shekel is good for Israeli consumers and tourists. It makes traveling abroad cheaper because the shekel increases in value in relation to local currencies. And since airfares and hotel rates are set in either dollars or euros, for the most part, when the shekel rises, it costs Israelis less to buy the same item. This also makes foreign imports less expensive for the Israeli consumer.

There is a downside to Israel’s economy, however. The strong shekel means foreign investors in Israeli startups get less value for their money. It also means less spending by foreign tourists since their dollars and euros do not go as far. And it also makes Israeli exports more expensive to foreign buyers.

This is not just a problem of a weak U.S. dollar due to America’s fiscal and financial policies vis-à-vis debt and government spending as a percentage of GDP. All of the world’s major convertible currencies were down against the NIS.

The British pound fell -0.247% on Tuesday and finished trading at a rate of NIS 4.1564 to the pound.