Why the Shekel continue to strengthen during COVID

Jeremy SchwaeberArticles

For some time now, the Israeli Shekel continues to be one of the strongest currencies in the world and it continues to grow at a record pace. During this past year, while the world has been grappling with a global pandemic, Israel also saw its share of difficulties. This however, did not stop the Shekel from continuing to rise. There are several reasons for this.

Israel's High-Tech Prowess

Israel is known as the Start-Up nation, notorious for its hi-tech expertise. At a time when the world is changing to a service economy, Israel was ready to answer the call. While a strong currency generally makes it harder to sell your products and services abroad, the continued high demand for Israeli technology has clearly overcome this barrier.

Global Currency Hedging

As the pandemic raged on around the globe, the world experienced a stock market crash in March, 2020. When this happened, smart investors knew that this was a good time to buy in, and in the subsequent months money flooded into stock markets all around the world. Essentially, the Shekel’s value increased as globally-minded investors looked to diversify into foreign currency to lower their dependence on the U.S. Dollar. Since the initial panic in March, 2020 the Shekel strengthened 12% against the U.S. Dollar.

Growing Energy Market

Israel also continues to pump product from its vast offshore gas fields and sell it to neighboring countries in U.S. Dollars. The influx of Dollars into the Israeli economy helped the Shekel to strengthen.

COVID Staycation

Normally, Israelis go on vacation every year, spending as much as $3B U.S. Dollars abroad. Additionally, due to Corona-related unemployment, imports of foreign goods into Israel was lower. The inability to travel and the lower demand for imports meant that fewer Shekels were exchanged for foreign currency, keeping Dollars in the country and strengthening the Shekel as a result.

Keeping The Balance Sheet In The Black

One of Israel's greatest accomplishments has been its positive balance of payments. Israel has been able to exceed its exports over its imports for many years. This keeps Israel as a lender nation and not a borrower nation, probably the most significant factor making Israel’s economy such an attractive investment destination.

Track Record of Strength

Looking at the last 18 years since the Shekel was at its weakest against the U.S. Dollar, the Shekel has gained 53%. This means that if you converted $100,000 to Shekels in 2002, it would be worth $153,000 today, before even investing any of it in securities. Since the U.S. elections of 2020, the Shekel has risen over 4% alone. Whether this is simply uncertainty in the market, or an expectation that America will continue to print money and lower the value of the U.S. Dollar, remains to be seen.

At Wise Money Israel, we continue to recommend investment in the Shekel as a hedge against other world currencies. Combining the Shekel strength with the great Israeli companies that provide some of the best investment opportunities in the world, we see tremendous growth potential in the future.

If you would like to start investing in the Shekel today, please contact us for assistance.

To invite a speaker click here