Overview
Barclays has released a currency outlook indicating that the Israeli shekel is expected to continue appreciating against the U.S. dollar, albeit at a slower rate than observed earlier in 2026.
Exchange Rate Dynamics
The bank highlights that the USD/ILS exchange rate remains closely correlated with U.S. equity indices because Israeli investment funds hold substantial positions in U.S. equities. Consequently, any further gains in U.S. stock markets would provide additional support to the shekel.
Geopolitical Factors
Barclays notes that the shekel’s risk premium, which compressed during the Iran war, still remains large. An improvement in the geopolitical outlook could therefore act as an extra tailwind for the Israeli currency.
Potential Policy Response
The outlook also cautions that the Bank of Israel may take measures to curb excessive shekel strengthening if the currency appreciates at a pace similar to that observed earlier in the year.
Market Implications
Overall, the commentary suggests that the shekel’s trajectory will be driven by a combination of U.S. equity performance, lingering geopolitical risk premiums, and possible central‑bank intervention.