The dollar fell below NIS 3 for the first time in over 30 years on Wednesday, continuing to falter on optimism around a ceasefire and a possible resolution of the Iran crisis, prompting concern from Israeli exporters.
The dollar-shekel exchange fell to 2.993, the US currency’s lowest level since October 1995. The dollar has depreciated some five percent against the shekel so far in 2026 and 25% since April 2025.
Avraham Novogrocki, president of Israel’s Manufacturers’ Association, which represents some 1,500 firms and 400,000 workers, said the strong shekel posed a risk to the economy.
“A dollar below NIS 3 is a death blow to export profitability,” he said. “A cumulative drop of about 20% in the exchange rate completely erases profit margins and pushes factories to the brink of closure.”
With revenue in dollars and expenses in shekels, the manufacturing sector was being squeezed, which would ultimately mean reduced activity and layoffs, Novogrocki said.
Bank of Israel remains on sidelines
At the same time, the hi-tech sector and multinational companies were already considering relocating operations, he added.
The Bank of Israel has so far opted to stay on the sidelines, arguing that it only intervenes when it determines the exchange rate is not trading based on fundamentals.
Since 2008, the central bank has bought tens of billions of foreign currency, mainly dollars, to prevent the shekel from appreciating too quickly and harming exports.
Israel’s annual inflation rate moved back below 2% in March, but the decline will likely have little impact on near-term interest rate decisions due to a spike in global energy costs caused by the conflict with Iran.
Inflation slipped in March to 1.9% from 2.0% in February, according to data on Wednesday from the Central Bureau of Statistics, coming in lower than a 2.1% rate in a Reuters poll and staying well within the government’s 1-3% annual target range.
The US and Israel began striking Iran on February 28, after which an effective blockade of the Strait of Hormuz by Iran led to a sharp rise in oil prices. The US has since begun its own blockade.
Economists had expected higher energy costs to help push up the consumer price index by 0.5% in March from February, but it rose just 0.4%.
Price gains in March were led by fresh vegetables and clothing.
Citing the inflationary effects of the war with Iran, the Bank of Israel on March 30 held its short-term interest rate at 4% for a second straight month after two consecutive reductions in November and January from 4.5%.
Bank of Israel Governor Amir Yaron, though, has held out the prospect of one or two cuts this year, depending on inflation.
Avraham Novogrocki, president of Israel’s Manufacturers’ Association, called on policymakers to cut rates in response to a more than 30-year peak of the shekel against the dollar that is harming exporters.
The shekel gained 0.5% versus the dollar to 2.993, the first dip below 3 shekels to the dollar since 1995.
Novogrocki said the smaller-than-expected rise in March’s CPI reinforced the notion that inflation is contained.
It “indicates that industry is absorbing the cost increases and is not passing them on to the consumer,” he said.
“There is no longer any justification for postponing the move” to cut rates, he added.