The Israeli new shekel ( '; شيكل جديد ; sign: ₪; code: ILS), also known as simply the Israeli shekel''' (, شيكل إسرائيلي), is the currency of Israel and is also used as a legal tender in the Palestinian territories of the West Bank and the Gaza Strip. The new shekel is divided into 100 agora. The new shekel has been in use since 1 January 1986, when it replaced the hyperinflated old shekel at a ratio of 1000:1.
The currency sign for the new shekel is a combination of the first Hebrew letters of the words shekel (ש) and ẖadash (ח) (new). It was previously known as the new Israeli shekel and the non-official abbreviation of NIS (ש"ח and ش.ج) is still commonly used domestically to denominate prices and also appears on the Bank of Israel's web site. However, the official international currency code of the Israeli new shekel is ILS, as set by the International Organization for Standardization under ISO 4217.
The origin of the name "shekel" (שקל) is from the ancient biblical currency by the same name. Shekel is any of several ancient units of weight or of currency in ancient Israel. Initially, it may have referred to a weight of barley. In ancient Israel, the shekel was known to be about 180 grains (11 grams or .35 troy ounces).
From the formation of the modern State of Israel on 14 May 1948 through 1952 banknotes continued to be issued by the Anglo-Palestine Bank as the Palestine pound which was pegged to the British Pound. In 1952, the Anglo-Palestine Bank changed its name to Bank Leumi Le-Yisrael (National Bank of Israel) and the currency name became the Israeli pound.
The Israeli pound (לירה ישראלית, "lira yisraelit") was the currency of the State of Israel from June 1952 until 23 February 1980, when it was replaced with the shekel on 24 February 1980. From 1955, after the Bank of Israel was established and took over the duty of issuing banknotes, only the Hebrew name was used, along with the symbol "I£". The pegging to the British Pound was abolished on 1 January 1954, and in 1960, the sub-division of the Israeli pound was changed from 1000 prutot to 100 agorot.
During the 1960s, a debate over the non-Hebrew name of the Israeli currency resulted in a law ordering the Minister of Finance to change the name pound into a Hebrew name, shekel (שקל). The law allowed the minister to decide on a proper date for the change. The law did not come into effect until February 1980, when the Israeli government decided to change the monetary system and introduce the shekel at a rate of 1 shekel = I£10.
The shekel, now known as the old shekel, was the currency of the State of Israel between 24 February 1980 and 31 December 1985. Both it and its predecessor the Israeli pound experienced frequent devaluations against foreign currencies during the 1960s and '70s. This trend culminated in the old shekel experiencing hyperinflation in the early 1980s. After inflation was contained as a result of the 1985 Economic Stabilization Plan, the new shekel was introduced, replacing the old shekel on 1 January 1986 at a rate of IS 1,000 to ₪1.
Since the economic crisis of the 1980s and the subsequent introduction of the new shekel in 1985, the Bank of Israel and the government of Israel have maintained much more careful and conservative fiscal and monetary policies, and have gradually introduced 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, with a current account surplus 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.
Since 1 January 2003, the new shekel has been a freely convertible currency. Since 7 May 2006, new shekel derivative trading has also been available on the Chicago Mercantile Exchange. This makes the new shekel 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 26 May 2008, CLS Bank International announced that it would settle payment instructions in new shekels, making the currency fully convertible. Since 20 March 2003, the new shekel has gained more than 44% in value against the US dollar.