Anna 
UBS has projected a significant appreciation of the Israeli shekel (ILS) against the US dollar (USD), driven by a decrease in the geopolitical risk premium. The shekel recently surged past the 3.80 mark against the dollar due to heightened tensions between Iran and Israel and the ongoing conflict with Hamas. However, UBS analysts anticipate that these pressures will abate, allowing the shekel to benefit from Israel’s economic recovery and the Bank of Israel’s (BoI) prudent policies.
UBS foresees the Federal Reserve’s anticipated easing cycle as a catalyst for further strengthening of the shekel. As geopolitical risks diminish, UBS predicts a robust performance for the shekel, outlining a gradual appreciation trajectory in its end-of-quarter forecasts for the USD/ILS exchange rate.
The projections suggest that the shekel will appreciate to 3.60 by the end of the next quarter, continue to 3.50, and then to 3.45, eventually stabilizing at 3.45 through the first quarter of 2025.
UBS’s report underscores the resilience of Israel’s economy, which appears poised to rebound from the geopolitical events that have recently affected currency fluctuations. The forecasted gains for the shekel reflect confidence in Israel’s economic management and the expected shift in US monetary policy.
The positive outlook for the shekel is premised on the assumption that the elevated risk premium, resulting from recent confrontations, will gradually decrease. This reduction in risk is anticipated to be a key driver of the shekel’s strength in the upcoming quarters.
In summary, UBS’s analysis indicates a promising future for the Israeli shekel, supported by a strong economic recovery and favorable monetary conditions.
