Goldman Sachs sees shekel as overvalued

Due to possible war with Iran and recent pressure on tech stocks, investment bank Goldman Sachs believes the shekel is 13% overvalued against the US dollar and is betting against the Israeli currency.

Goldman Sachs said, “The underperformance of tech stocks and the increase in geopolitical risk in the Middle East have been two of the main drivers in the market recently. The Israeli shekel is particularly sensitive to both of these factors, which in our opinion makes short positions on the shekel an attractive hedging tool in the foreign exchange market.”

The investment bank continued, “In addition to the shekel’s responsiveness to these factors, we believe that a long position on the dollar/shekel is an attractive hedge, due to the shekel’s current pricing level. According to our GSDEER model, the shekel is 13% overvalued against the dollar. To this is added the shekel’s slightly negative carrying cost, in contrast to other currencies in emerging markets with high beta, which are undervalued and/or benefit from higher interest rate spreads.”

In the last three months, the shekel has strengthened against the dollar by over 4%, and about a week and a half ago, it fell below the NIS 3.07/$ mark – its strongest level against the dollar in 30 years. Alongside the trend of the dollar weakening worldwide, the shekel’s strengthening in recent months has been recorded alongside a surge in the Tel Aviv Stock Exchange (TASE), huge deals in the tech and defense industries, and a trend of investors shifting from overseas to local tracks.

Alongside the recommendation, Goldman Sachs also described the risks of betting against the shekel. “The main ‘global’ risk to the short shekel hedge is a sharper decline in the global dollar than we expect, or alternatively, that geopolitical outcomes turn out to be a ‘clearing event’ for Middle East risks, following a short-lived wave of declines. On the ‘local’ side, we should watch for a positive push from our economists’ higher-than-consensus growth forecasts, or an increase in local institutional hedging ratios (although we note that these ratios remain largely unchanged through 2025).”

“However, we expect domestic factors to be a headwind for the shekel. On the monetary policy front, the strength of the shekel has raised concerns about export competitiveness; we have found that past interventions by the Bank of Israel in the foreign exchange market have responded to deviations in export growth from the prevailing trend. Finally, after a lull in the political noise following the ceasefire agreement, we believe that the growing risks of geopolitical escalation or increased domestic uncertainty are not adequately reflected in the current exchange rate,” Goldman Sachs concluded.

Published by Globes, Israel business news – en.globes.co.il – on February 24, 2026.

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