The shekel on Wednesday crossed below the threshold of NIS 3 per dollar, its strongest level in more than 30 years, fueled by growing optimism over an end to the war with Iran and a ceasefire in Lebanon. But manufacturers and exporters warned that the strength of the currency presented a risk to the economy.

The shekel was trading at 2.993 to the dollar on Wednesday, its strongest showing since October 1995. The local currency has appreciated more than 5 percent against the dollar so far in 2026, and more than 20% over the past year, despite an economy strained by military campaigns with Iran and ballooning war costs.

“A dollar exchange rate below NIS 3 is a death blow to export profitability,” warned Israel Manufacturers’ Association President Avraham Novogrocki. “A cumulative change of about 20% in the exchange rate completely erases profit margins and pushes factories to the brink of closure.”

The overly strong shekel has a deflationary force as it makes imports cheaper, restrains price rises and credit costs for consumers, and enables the Bank of Israel to lower interest rates. However, it also erodes the competitiveness of Israeli manufacturers, especially businesses reliant on exports and earning in dollars, while paying expenses including salaries in shekels.

Novogrocki cautioned that the industry is grappling with “collapsing dollar revenues and rising shekel expenses,” which will have broader consequences, including reduced activity and investments, and........

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