Markets and Shekel: Exchange Rate Drivers
The article discusses the movement of the Israeli Shekel's exchange rate during the period from August 13 to August 21, 2026, highlighting that the main trend of the Shekel's price is primarily reflected in the Israeli market through the representative rate set by the Bank of Israel. The price signal is transmitted from the bank to Israeli commercial banks, which translate it into actual prices that vary depending on the type of transactions and liquidity. These variations then impact the currency exchange markets in East Jerusalem and the West Bank. The study indicates that changes in the currency's value often originate within the Israeli banking system before reaching the local markets, and there is a significant convergence in the price center between the Jerusalem and West Bank markets, albeit with differences in execution margins and costs. It also clarifies that price differences do not always reflect the fundamental value of the currency but often represent the costs associated with accessing cash and executing transactions, with the emergence of a "cash execution premium." In conclusion, the movement of the exchange rate passes through multiple layers of banks and liquidity before reaching the consumer. The analysis shows that the Israeli market plays the primary role in determining the general trend, while local costs and liquidity disparities lead to price differences between the local markets.
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