Israeli institutional FX sales drive shekel weakness

ISRAEL - In Brief 05 May 2026 by Sani Ziv

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Israeli institutional investors sold $5.2 billion in the first quarter of 2026, following sales of about $13 billion in the fourth quarter of 2025. These data are consistent with a reduction in their dollar exposure, mainly through increased hedging and adjustments to rising U.S. equity markets, which effectively translate into FX sales. In contrast, In Q1, non-residents purchased foreign currency on a net basis totaling $6.6 billion, compared with purchases of $1.8 billion in the previous quarter. Part of these purchases may reflect profit-taking from gains accumulated in the local equity market. Balance of payments data, currently available only through the fourth quarter of 2025, also point to a sharp increase in undistributed profits of foreign investors. This component does not directly affect FX flows, as it is offset in the financial account, but some of these profits may have been realized later and contributed to FX demand by foreign investors. These trends appear to have continued into April (despite the war), with the shekel appreciating by about 0.6% during the monthThe chart shows that institutional investors have been net sellers of FX in recent periods, with notable volatility but a clear downward trend, reflecting ongoing hedging activity and reduced dollar exposure. Institutional investors’ net FX purchases/sales (USD billions)Source: Bank of Israel