What Are Shekels? Israel’s Currency Explained
Explore the shekel, from its ancient origins as a unit of measure to its modern role as Israel's official currency and its place in the global economy.
A “shekel” refers to a unit of currency or weight that holds both ancient and modern significance. Historically, it served as a measure for precious metals in various ancient civilizations. Today, its primary usage is as the official currency of the State of Israel.
The Modern Israeli Shekel
The official currency of the State of Israel is known as the New Israeli Shekel, abbreviated as NIS or ILS. It functions as the primary medium of exchange throughout Israel, facilitating daily transactions, salary payments, and the pricing of goods and services. The New Israeli Shekel is also recognized as de facto legal tender in Palestinian territories, including the West Bank and the Gaza Strip.
The Bank of Israel holds the sole legal authority to issue and regulate the currency. The New Israeli Shekel is subdivided into 100 smaller units called agorot. Banknotes are issued in denominations of 20, 50, 100, and 200 shekels. Coins are available in denominations of 10 agorot, ½ shekel (50 agorot), 1 shekel, 2 shekels, 5 shekels, and 10 shekels. The currency symbol for the shekel is ₪, which appears after the numerical value.
Historical Significance of the Shekel
The term “shekel” originates from an ancient unit of weight, not initially a coin, used for measuring precious metals like silver and gold. This practice was widespread in the ancient Near East, long before the advent of minted coinage. The word itself is derived from a Proto-Semitic root meaning “to weigh.”
Ancient texts, particularly biblical scriptures, frequently reference the shekel as a measure of value, appearing in significant transactions and religious contributions. Over time, the concept evolved from a unit of weight to minted coins that still bore the name “shekel.” The modern State of Israel’s decision to name its currency the “shekel” pays homage to this deep historical and cultural heritage.
Shekel in the Global Economy
The New Israeli Shekel operates as a floating currency within the global financial system. This means its value against other international currencies is primarily determined by the dynamics of supply and demand in foreign exchange markets. The Bank of Israel monitors these movements and publishes representative exchange rates.
Several factors influence the shekel’s exchange rate. Israel’s overall economic performance plays a significant role. Political stability within the region and broader geopolitical events can also cause fluctuations in the shekel’s value, as such events impact investor confidence. Foreign investment, particularly in Israel’s robust technology and startup sectors, contributes to the shekel’s strength. Global economic trends, such as the strength of major currencies like the US dollar, also affect the shekel’s standing.
The Bank of Israel may intervene in the foreign exchange market, for instance, by selling foreign currency, to moderate volatility and stabilize the shekel. This convertibility allows for international trade and facilitates travel for individuals.