The Bank of Israel published its second-quarter 2025 review of Israel’s foreign currency market, reporting a marked strengthening of the shekel alongside higher exchange-rate volatility and increased trading activity. The move was attributed to improved investor sentiment after the events of Operation Rising Lion and broad-based US dollar weakness. Over the quarter, the shekel appreciated by about 9.3 percent against the US dollar and 1.5 percent against the euro, and strengthened by 6 percent on a nominal effective basis against the currencies of Israel’s main trading partners. Actual shekel-dollar volatility rose, with the average standard deviation of exchange-rate changes increasing by 3 percentage points to 11.1 percent, while implied volatility in over-the-counter shekel-dollar options increased by 1.1 percentage points to about 9.8 percent at quarter-end. Segment estimates showed net FX sales by nonresidents of USD 8.9 billion and by the financial sector of about USD 0.2 billion, versus business-sector purchases of about USD 5.3 billion, while institutional investors bought USD 0.1 billion. Average daily trading volume versus the domestic banking system rose about 6 percent to USD 14 billion, and nonresidents’ share of total trading volume versus the domestic banking system fell by about 1.2 percentage points to about 39.12 percent; in estimated spot and forward activity (excluding swaps and options), nonresidents accounted for about 86 percent of trading volume.

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