Currency Exchange Concerns in Israel
Recently, the dollar’s decline below the 3-shekel mark has led many Israelis to rush to purchase U.S. currency, resulting in significant shortages at currency exchange locations nationwide. Experts in currency exchange believe that mounting concerns over security tensions, alongside ongoing conflicts with Iran and Hezbollah, may lead to rising interest rates in the upcoming months.
As the Shavuot holiday and summer travel season approach, many Israelis are securing hundreds or even thousands of dollars. This high demand has left a notable shortage of U.S. cash. One currency exchanger in central Israel noted to ynet, “Every day, we run out of dollars. A few tourists come back and sell us cash, and then we’re empty again. Unfortunately, the war and high insurance costs mean we’re not getting regular cash shipments by air at the moment.”
According to a firm in Jerusalem, some consumers believe interest rates are likely to soar soon and are buying large amounts of dollars as a sort of backup investment to keep at home. It’s been a while since there have been such crowds at money exchange shops, and demand has even extended to weaker currencies like the British pound, currently trading at about 4.00 shekels, and the Swiss franc, which has dropped to around 3.80 shekels.
A senior government economic official mentioned that the limited availability of cash, also affecting banks to some extent, is largely due to the suspension of airborne foreign currency shipments during the six weeks of conflict. Nonetheless, he reassured the public that “shipments have resumed in recent days, and the situation should gradually improve.”
Manufacturing Sector on Alert
Meanwhile, there is rising concern in the manufacturing sector. Over the weekend, Abraham Nowogrodsky, the head of the Manufacturers Association, warned that if the dollar drops below 3 shekels, the entire production industry could face severe risks. “It’s hard to see why the Bank of Israel and the Ministry of Finance aren’t taking action to protect the industry,” he remarked. He noted that the dollar has plummeted from around 3.70 shekels to this precarious level for the first time in over three decades.
Mr. Nowogrodsky emphasized that this isn’t just a temporary blip but a process that poses immediate threats to the economy. “A dollar that starts with a ‘2’ is devastating for export profitability. A 20% cumulative drop in the exchange rate over the year could wipe out profit margins, forcing factories to shut down.” He elaborated that the industry feels “squeezed” as dollar-based revenues shrink while expenses in shekels continue to rise, leading to investment cancellations and layoffs. Some high-tech and multinational companies are even exploring exit strategies from Israel. An overly strong shekel, he warned, could drive relocations, negatively affecting state revenue and possibly resulting in higher taxes.
On Friday, the Bank of Israel set the representative rate at 3.00 shekels to the dollar and 3.51 shekels to the euro. However, trading continued ahead of the Sabbath revealed the U.S. dollar further declining to approximately 2.98 shekels.
