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⭐ 1. The Three-Shekel System: Before the Modern ILS
Israel’s currency system went through three major phases before reaching the stable shekel we know today.
A. Israeli Pound (Lira) – 1948 to 1980
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Israel’s first national currency.
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Initially pegged to the US dollar, later allowed to float.
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Severe inflation during the 1970s caused persistent weakness against the USD.
B. Old Shekel (1980–1985)
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Introduced as a replacement due to rising inflation.
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Inflation surged into extreme triple digits (above 400% at peak).
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The old shekel collapsed rapidly in value versus the USD.
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By 1985, stabilization required a 1,000:1 conversion to create a new currency.
C. New Israeli Shekel – ILS (1985–Present)
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Today’s currency.
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Introduced to restore monetary stability.
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Became the foundation for Israel’s modern economic framework.
⭐ 2. 1985: Birth of the New Shekel & the Stabilization Program
1985 marked a historic turning point.
Israel launched a comprehensive economic stabilization plan to defeat hyperinflation and rebuild confidence.
Key Measures
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Tight monetary policy
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Sharp reductions in government spending
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Temporary peg to the US dollar
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Wage and price freezes
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Broad structural reforms
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Impact on USD/ILS
These policies dramatically strengthened stability.
The shekel stabilized, inflation collapsed, and USD/ILS gradually moved into a healthier, more predictable range.
⭐ 3. USD/ILS in the 1990s – Controlled Float & Strong USD Cycles
Period: 1985–1998
After the reforms, Israel adopted a crawling band system, where:
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ILS traded within a controlled corridor
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The band gradually widened
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Small, controlled devaluations were used to manage competitiveness
1990s Highlights
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A massive immigration wave from the former Soviet Union increased demand for USD.
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Israel’s tech sector began to take shape.
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Early–mid 1990s: ILS weakened against the USD.
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Late 1990s: improved stability and investment flows strengthened the shekel.
⭐ 4. 1998–2008: The Free-Float Era & a Stronger Shekel
In 1998, the Bank of Israel (BOI) removed the crawling band and allowed the shekel to float freely.
Major USD/ILS Movements
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2001–2002: ILS weakened above 4.8 due to global recession and regional tensions.
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2003–2008: Tech-sector expansion and foreign investment exploded → ILS strengthened sharply.
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By 2008, USD/ILS had fallen below 3.3, marking one of the strongest periods in ILS history.
⭐ 5. 2008–2014: Global Crisis & Heavy BOI Intervention
During the global financial crisis, the shekel continued strengthening, fueled by:
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Strong tech industry performance
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Attractive interest rates
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Robust fiscal policy
The BOI intervened aggressively to prevent the shekel from becoming too strong and hurting exports.
BOI Actions
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Large-scale USD purchases
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Major accumulation of FX reserves
Typical USD/ILS Range
3.2 – 3.8 during 2008–2014.
⭐ 6. 2014–2020: The Strong-Shekel Boom
Israel emerged as a global tech powerhouse, attracting unprecedented foreign capital into startups, R&D, and multinational tech operations.
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Key Drivers
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Near-zero inflation
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Stable interest-rate policy
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Heavy foreign inflows into technology and venture capital
USD/ILS Behavior
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Frequently moved between 3.3 – 3.9
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By 2019–2020, ILS strengthened to around 3.20, one of its strongest levels ever.
⭐ 7. 2020–2022: Pandemic Strength, Then Global USD Surge
2020 – COVID-19
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Surprisingly, the shekel strengthened to 3.20.
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Israel’s tech exports expanded, offsetting losses in tourism and services.
2022 – US Dollar Supercycle
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The US Federal Reserve began its most aggressive rate-hike cycle in decades.
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The USD surged globally.
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USD/ILS climbed toward 3.6.
⭐ 8. 2023–2024: Geopolitical Shock & a Sharp USD/ILS Spike
The October 2023 conflict triggered a wave of risk aversion and selling pressure on the shekel.
BOI Response
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Announced a $30 billion USD-selling program
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Conducted direct currency-market interventions
Market Impact
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USD/ILS surged to around 4.05, its highest level since 2015.
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Gradually stabilized as BOI actions calmed the markets.
Disclaimer : The content on this blog is for informational purposes only and does not constitute financial, investment, tax, or legal advice. I make no guarantees about the accuracy or completeness of the information provided. You are responsible for your own financial decisions—always consult a qualified professional before acting on any information from this site. I am not liable for any losses or damages resulting from the use of this blog.
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