What Is the Shekel? From Ancient Currency to Modern Money
Uncover the rich history and modern significance of the Shekel, tracing its path from ancient times to Israel's current monetary system.
The shekel is the official currency of Israel, playing a central role in the nation’s financial system and daily economic activities. Known officially as the New Israeli Shekel (NIS), this monetary unit holds a history stretching back to ancient times. The term “shekel” originates from an ancient unit of weight. Today, it is a modern fiat currency, maintaining its value through economic stability and central bank oversight.
Historical Roots of the Shekel
The origins of the shekel trace back to ancient Mesopotamia, where it first emerged not as a coin, but as a unit of weight. This unit was primarily used for measuring precious metals, such as silver and gold, facilitating trade before the widespread adoption of minted coinage. The term “shekel” derives from the Hebrew root meaning “to weigh,” underscoring its initial function as a standard of measurement.
Ancient texts, including biblical narratives, frequently mention the shekel in various transactions. For instance, Abraham’s purchase of a burial plot for 400 shekels of silver is an early recorded instance of its use. In ancient Israel, the shekel’s weight varied by region and era, but it generally represented around 11 grams of silver. The “sanctuary shekel” was a standardized measure referenced in religious contexts, like the half-shekel tax for the Tabernacle.
Over centuries, the shekel evolved from a unit of weight to actual coins, with various forms circulating throughout the ancient Near East. The Tyrian shekel, for example, gained prominence due to its silver purity and was accepted for the Temple tax in Jerusalem. After the formation of the modern State of Israel in 1948, the currency transitioned through the Israeli pound (lira) from 1952 to 1980, and then the original Israeli shekel from 1980 to 1985. The original shekel faced hyperinflation in the early 1980s, leading to its replacement by the New Israeli Shekel in 1986.
The Modern New Israeli Shekel
The New Israeli Shekel (NIS) is denoted by the symbol ₪ and the ISO code ILS. It is subdivided into 100 smaller units known as agorot (singular: agora). The Bank of Israel issues both banknotes and coins.
Banknotes are issued in the following denominations:
20 NIS
50 NIS
100 NIS
200 NIS
These notes feature prominent Hebrew poets and landscapes. For example, the 20 NIS note is green and features Rachel Bluwstein, while the 50 NIS note is purple and depicts Shaul Tchernichovsky. Security features, such as watermarks, see-through elements, and security threads, are incorporated to deter counterfeiting.
Coins are available in the following denominations:
10 agorot
½ shekel
1 shekel
2 shekels
5 shekels
10 shekels
Some coins incorporate historical symbols, such as the lily on the 1 shekel coin, which is based on a Judean coin from the Persian period, and the candelabrum on the 10 agorot coin, a replica from an ancient coin. Daily transactions within Israel widely use these physical forms of the NIS, alongside various digital payment methods.
Economic Significance and Exchange Rate
The New Israeli Shekel’s exchange rate against major international currencies, such as the U.S. Dollar (USD) and Euro (EUR), is determined by market forces. Factors influencing its value include Israel’s economic performance, interest rates set by the central bank, inflation, and broader global market conditions. The Israeli economy is an advanced, free-market economy with a strong high-tech sector, contributing to the shekel’s relative stability.
The Bank of Israel, as the central bank, plays a significant role in managing monetary policy and maintaining price stability. It has the exclusive authority to issue shekel banknotes and coins. The Bank of Israel may intervene in the foreign exchange market to moderate volatility in the shekel’s exchange rate, for example, by selling foreign currency to prevent depreciation or buying to stem appreciation.
The shekel’s purchasing power within Israel reflects the disposable income of the population, which was approximately 95,010 NIS per capita in 2022. This metric indicates the amount of income available for spending after taxes and social security contributions. The shekel’s convertibility and the availability of derivative trading on international exchanges highlight its significance in international trade and investment. This global presence allows for its exchange and use in various financial operations worldwide.