UBS Says BOI May Buy Dollars at 2.80 Shekels as Inflation Risks Falling Below 1%
Updated
Updated · Ynetnews · May 21
UBS Says BOI May Buy Dollars at 2.80 Shekels as Inflation Risks Falling Below 1%
1 articles · Updated · Ynetnews · May 21
2.80 shekels per dollar is emerging as the Bank of Israel’s likely intervention threshold, UBS said, because further shekel gains could push inflation below the central bank’s 1% lower target this summer.
1.4% core inflation last month — down from 3.6% a year earlier — and near-zero tradable-goods inflation have made currency strength a bigger policy risk than price pressures.
43.5% growth in Israeli institutions’ FX hedge book to about $99 billion has been a key driver of shekel appreciation, UBS said, alongside Google’s $32 billion Wiz acquisition.
Another $20 billion to $25 billion of dollar sales could still come if hedge ratios move back toward historical averages, though a U.S. equity sell-off could lift the dollar back to 3.0-3.1 shekels.
UBS expects the BOI to cut rates twice — next week and in July — to 3.5%, with FX intervention still possible as Israel’s currency becomes increasingly tied to Wall Street and high-tech flows.
Amidst a regional war, why is Israel's currency so strong that its central bank may be forced to weaken it?
Can a central bank protect its economy when one tech deal has more impact than its own monetary policy?
Record Shekel Strength in 2026: Exporter Warnings, Deflation Concerns, and Central Bank Challenges
Overview
In May 2026, the Israeli shekel reached a 33-year high against the US dollar, causing significant concern among tech exporters and manufacturers. This sharp appreciation threatens to undermine key growth sectors of the Israeli economy, as companies like Ceragon are already feeling the impact through unpredictable profitability and the need for cost mitigation and FX hedging. The strong currency is raising alarms about an unfolding economic crisis, highlighting the challenges faced by exporters and the broader risks to Israel’s economic stability.