Bank of Israel buys $801M in FX market to curb shekel strength

The Bank of Israel stepped back into the foreign exchange ring in May, scooping up $801 million in foreign currency to push back against a shekel that was getting uncomfortably strong. It was the central bank’s first direct currency intervention since 2022, a move that underscores just how much pressure a surging shekel has been putting on the country’s export-driven economy.

The shekel had been trading near a 33-year peak against the US dollar, a level that sounds impressive on paper but was quietly devastating for Israeli companies that earn revenue in foreign currencies.

What the numbers look like

Israel’s total foreign exchange reserves climbed to a record $238.681 billion by the end of May 2026. That’s a monthly increase of $2.953 billion, though the $801 million in direct purchases only tells part of the story.

The lion’s share of the reserve growth, roughly $2.685 billion, came from revaluation gains. In English: the existing assets the central bank was already holding became more valuable, largely due to shifts in global currency values and asset prices.

The disclosure came on June 7, about a week after May closed. The Bank of Israel framed the purchases as targeted actions designed to maintain orderly market functioning, not an attempt to peg the shekel at any particular exchange rate.

Why the shekel got so strong

Israel’s technology sector has been a magnet for foreign capital for years, and inflows of investment dollars naturally create demand for shekels. When overseas investors want to buy stakes in Israeli startups or pour money into Tel Aviv-listed equities, they have to convert their dollars into local currency first.

The technology sector, which forms the backbone of Israel’s export economy, was particularly exposed. Tech companies typically generate most of their revenue internationally while paying salaries and operational costs in shekels. A stronger shekel means those dollar-denominated revenues buy fewer shekels at payroll time.

What this means for investors

The intervention sends a clear signal that Israel’s central bank has a pain threshold, and the shekel was approaching it. For anyone holding Israeli assets or trading the shekel, the $801 million purchase is essentially a warning shot.

For equity investors with exposure to Israeli tech stocks, the intervention is broadly positive. A weaker shekel, or at least one that stops strengthening, protects the earnings of export-oriented companies. That said, the Bank of Israel explicitly avoided committing to a specific exchange rate target.

There’s also an inflation angle worth watching. A strong shekel acts as a natural brake on import prices, effectively keeping consumer inflation in check by making foreign goods cheaper. If the central bank succeeds in weakening the currency, some of that disinflationary benefit disappears, potentially complicating monetary policy decisions down the road.

The $238.681 billion reserve pile gives the Bank of Israel substantial ammunition if it decides to escalate.

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