Israeli New Shekel - History

History

The Israeli lira, followed by the old sheqel, both experienced frequent devaluations against the US dollar and other foreign currencies starting in the early 1960s and accelerating from the mid-1970s onwards. This trend culminated in the old sheqel suffering from hyperinflation in the early 1980s. After inflation was contained as a result of the 1985 Economic Stabilization Plan, the new sheqel was introduced, replacing the old sheqel on January 1, 1986, at a rate of 1,000 old sheqalim = 1 new sheqel.

Since the economic crisis of the 1980s and introduction of the New Sheqel, the Bank of Israel and the government of Israel have maintained much more careful and conservative fiscal and monetary policies alongside with the gradual introduction of various market-based economic reforms. In addition, the signing of free trade agreements helped the Israeli economy become more competitive, while heavy investment in its industrial and scientific base allowed the country to take advantage of opportunities associated with the rise of the global knowledge economy, thus greatly increasing exports and opening new markets for its products and services. As a result of these factors, inflation has been relatively low and the country now maintains a positive balance of payments (equivalent to about 3% of its GDP in 2010). Consequently, its currency has strengthened considerably, rising approximately 20% in value relative to the US dollar in the 2000s (decade), thereby reversing the trend of historical weakness the Israeli currency exhibited in the decades prior. In the future, the exploitation of recently discovered natural gas reserves off the Israeli coastline that is expected to begin in the mid-2010s decade and onwards may serve to further strengthen the Israeli currency.

Since January 1, 2003, the sheqel has been a freely convertible currency. Since May 7, 2006, sheqel derivative trading has also been available on the Chicago Mercantile Exchange. This makes the sheqel one of only twenty or so world currencies for which there are widely-available currency futures contracts in the foreign exchange market. It is also a currency that can be exchanged by consumers in many parts of the world.

On May 26, 2008, CLS Bank International announced that it would settle payment instructions in Israeli New sheqel, making the currency fully convertible.

The currency is not produced in Israel, as the country has no mint. Currently, the coins are minted at the Korea Minting and Security Printing Corporation (KOMSCO), the banknote and coin producer of South Korea, while the banknotes are produced by Orell Füssli of Zurich, Switzerland.