For many olim, especially Americans, their investments remain overwhelmingly dollar-based. Retirement accounts, brokerage portfolios, Social Security income – all denominated in U.S. dollars. Canadians often mirror this pattern in Canadian dollars, English with pounds, and similarly with most ex-pats from other countries. Emotionally and psychologically, it feels natural. After all, that’s the currency in which they built their wealth, and they are familiar with the systems and investments available in their home country.

Living in shekels

But life in Israel runs on shekels, and that’s where the challenge begins. Many people question whether they should be investing in Israel, but they also need to be asking whether their currency exposure is appropriate for where they live and spend. Regardless of whether we hold US dollars, Canadian dollars, pounds, or euros, the fundamental issue is the same. If your expenses are in shekels but your assets are in a foreign currency, you are exposed to significant currency risk, even if you never intended it.

Take the U.S. dollar as a popular example. In 2002, the exchange rate was close to five shekels to the dollar. Since then, however, we have seen significant erosion against the shekel and other Western currencies. The current rate, which is hovering around 3.10 nis to the dollar, can feel painful to someone who remembers “the good old days.”

So naturally, the question arises ”should we wait before converting our money?”

A while back I had Canadian clients who faced exactly this dilemma. The clients were transitioning their finances to Israel when the Canadian dollar rate was approximately 3.3 shekels. They felt the rate was too low and were convinced it would recover. It seemed reasonable, especially since it had climbed to over four nis per dollar a while back. Currencies move in cycles, don’t they, and it’s bound to recover?

Fast forward a number of years and the Canadian dollar is now languishing closer to 2.25 nis to the dollar after an additional 30% devaluation.

The lesson? We simply never know in which direction a currency will move.

Currency forecasting is notoriously unreliable. Economists, banks, and analysts consistently revise projections. Political shifts, global crises, interest rate policies, technological developments — all can move exchange rates in ways that defy logic. Betting heavily on one currency is not a strategy for the average investor; it is merely speculation.

So what’s the alternative?

Currency strategy

I often present clients with a simple explanation to bring home the point. Let’s say the dollar is trading at 3.2 shekels, and you have all your assets in the U.S., but you need shekels to live on. If you exchange 50% now, three things can happen over the next five years:

1. 1. The rate stays approximately the same.
   2. The rate drops.
   3. The rate rises.

If the rate stays roughly the same, you will not regret having exchanged your savings. Your purchasing power remains stable.

If the rate rises significantly, you might feel a twinge of regret — but you will also be pleased that your remaining dollars are now worth more. You can convert additional funds at the higher rate. Overall happiness.

If the rate falls significantly, you will be relieved that you converted part of your assets earlier at a better rate. Again, overall happiness.

In other words, partial conversion reduces the emotional and financial extremes. It shifts you from a high-risk, all-or-nothing position to a more balanced, diversified overall financial state.

The real goal is not to “win” the currency game. It is to increase your overall happiness and financial stability, and that is what happens when you convert your foreign currency into the local currency you spend daily.

Buying happiness

Happiness in financial planning does not come from timing markets or exchange rates. It comes from reducing uncertainty, lowering risk, and aligning your income and assets with your lifestyle. Diversification is a psychological as well as a mathematical principle.

Everyone living in Israel needs some exposure to the local currency to avoid unnecessary fluctuations in daily life. When your groceries, property taxes, healthcare , and grandchildren’s gifts are priced in shekels, relying exclusively on foreign currency creates vulnerability. A strong shekel effectively reduces your income. A weak shekel increases it. That is not a stable retirement strategy.

History reinforces this point, as can be seen clearly in the Bank of Israel’s long-term exchange rate data. From 1985 to 2002, there was a steady devaluation of the shekel. The shekel consistently devalued against the dollar such that many prices in Israel were quoted in dollars rather than shekels. For immigrants holding dollars at that time, it felt like protection, and offered security.

But from 2002 through 2025, the pattern shifted. While there have been fluctuations, the broader trend has been a strengthening shekel relative to the dollar. Those who assumed the dollar would always rise discovered that that is not always the case.

Sometimes the most important adjustment is not in the portfolio — it is in our mindset.

Many Americans, in particular, are dollar-centric. The dollar feels stable, powerful, and global. And it is the world’s dominant currency. But dominant does not mean invincible. Exchange rates reflect economic performance, fiscal discipline, innovation, demographics, and geopolitical stability across the globe. No currency moves in one direction forever.

The prudent approach is not to abandon foreign investments altogether. Global diversification remains essential. Rather, it is to recognize that currency allocation is part of overall asset allocation. Where you live and what currency you spend are very important factors. Your liabilities, both present and future, are denominated in a currency, and your assets should reflect that reality.