Israel

Israel holds dollar reserves and settles trade in USD. Every time the Fed expands M2, that premium compounds against the ILS, on top of domestic inflation.

CPI: World Bank (FP.CPI.TOTL.ZG). US M2: Federal Reserve FRED (M2SL). Reserve premium = cumulative M2 growth − cumulative US CPI.

In early 2023, one US dollar bought around 3.4 Israeli shekels. By late 2023, after months of judicial overhaul protests that rattled investor confidence and then the October 7th Hamas attack and subsequent war, that same dollar was buying closer to 3.9 shekels. That's a swing of roughly 15% — and if you had NIS savings or Israeli assets denominated in local currency, that gap came straight out of your pocket in dollar terms.

Israel runs one of the more sophisticated economies in the Middle East, with a tech sector that punches well above its weight globally. But the shekel is sensitive to geopolitical risk in ways that currencies like the euro or yen simply aren't. The Bank of Israel intervened repeatedly in 2023 and 2024, spending billions in foreign reserves to prevent a steeper collapse. That intervention worked — partially — but it also signals how exposed the currency is when things go sideways politically or militarily.

For the roughly 200,000 American citizens living in Israel, this creates a strange split reality. Your dollar income or savings feel stronger in Tel Aviv grocery stores and coffee shops, but your Israeli assets — apartment values in Jerusalem, stock options in a local startup, a pension denominated in NIS — all look smaller when converted back to dollars. The direction cuts both ways depending on which side of the currency you're standing on.

Inflation in Israel ran above 5% through much of 2022 and 2023 before cooling, which compounded the exchange rate pain for anyone holding shekels without a dollar hedge. The purchasing power loss isn't just the exchange rate move — it's the exchange rate move plus local inflation eating into what those shekels could actually buy. Run the numbers in the calculator to see what your specific amount has actually lost in real terms.