Jerusalem, 5 August, 2025 (TPS-IL) — The Bank of Israel reported that in the second quarter of 2025, the Shekel strengthened markedly, in view of improving investor sentiment after the events of Operation Rising Lion and the weakening of the dollar against major currencies worldwide. During the course of the quarter, the shekel strengthened by approximately 9.3 percent vis-à-vis the dollar and by 1.5 percent vis-à-vis the euro. In addition, the shekel strengthened by 6 percent against the currencies of Israel’s main trading partners, in terms of the nominal effective exchange rate (i.e., the trade-weighted average shekel exchange rate against those currencies).

Worldwide, the trend of dollar weakness continued, in view of the tension over the global trade war, and the continued lack of certainty over the US tariff policy. Among other things, the dollar weakened during the course of the quarter by 3.4 percent against the Japanese yen and by 7.8 percent against the euro

The average standard deviation of changes in the Shekel/Dollar exchange rate, which represents its actual volatility, increased by 3 percentage points during the quarter, to an average level of 11.1%.

The average implied volatility in over-the-counter shekel/dollar options —an indicator of expected exchange-rate volatility— increased by 1.1 percentage points during the quarter, to an average level of about 9.8% at the end of the quarter.

This is alongside the average level of implied volatility in foreign exchange options in emerging markets, which increased by 0.8 percentage points compared to the previous quarter, to 11.1% at the end of the quarter. In advanced economies, there was a moderate increase of about 0.8 percent in its average level, to about 9% at the end of the quarter.

Gil Tanenbaum

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