The forex market has been stormy and the shekel has fallen sharply since Tuesday. Even though the Tel Aviv Stock Exchange was closed for the Passover holiday, and local forex dealers were on vacation, the Israeli currency is on the decline. In futures, the shekel-dollar exchange rate increased by 1.24% at 3.669/dollar and the shekel-to-the-euro exchange rate increased by 2.11% at 4.032 shekels/euro – a level not seen since 2020. The shekel-sterling rate is 1.68% higher at 4.57 Shekel / British Pound.
On Tuesday, the Bank of Israel set the representative shekel-dollar exchange rate 1.684% higher at 3.624 shekels/dollar, the shekel-euro rate was set 1.569% higher at 3.949/euro, and the shekel-sterling rate was set 1.123% higher at 4.503 shekels. / pound.
Although the shekel is rapidly approaching 3.70 shekels/dollar for the first time since March 2020, the US dollar has weakened significantly in recent months against the world’s major currencies. The dollar index is down 10% from its peak last year, when the Federal Reserve was sharply raising interest rates.
Even when Prime Minister Benjamin Netanyahu fired Defense Minister Yoav Gallant and there were spontaneous mass protests against the government’s judicial reform and the Histadrut called for a general strike, the shekel did not weaken to such levels. Even last week’s security escalation with rockets fired from Lebanon, Syria and Gaza and deadly terrorist attacks in Israel did not see the shekel drop to its current level.
On social media, the sharp drop in the value of the shekel is attributed to leaks that the rating agency Moody’s is set to downgrade Israel’s credit rating outlook tomorrow from positive to stable. However, there is no reliable support for this rumor in the international financial media or reliable market sources. In addition, volumes have been low with most Israeli traders on vacation so that relatively small transactions can distort exchange rates. A clearer picture will be available later today when Israeli traders return to the forex arena.
Market sources believe that the exchange rate of the shekel against the dollar in normal circumstances will be 3.4 shekels/dollar. But these are exceptional times with the government’s planned judicial reform weighing heavily on the Israeli currency, even if the case is put on hold until after the Passover recess in the Knesset, while settlement talks take place under the auspices of President Isaac Herzog. The security escalation also did not help the shekel, but past terrorist events and even major operations against Gaza hardly affected the Israeli currency.
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Moody’s warns that judicial reform could jeopardize Israel’s rating
In contrast, the government’s efforts to reform Israel’s judiciary have affected the way the country is perceived abroad. Six weeks ago credit ratings agency Moody’s warned that the proposed changes could “materially weaken judicial power and thus be credit negative”. However, since the suspension of the judicial reform, indicating that Moody’s will not downgrade Israel’s credit rating. However, it cannot be ruled out that the forecasts will be divided from positive to stable as a tangible warning after even senior Israeli officials in the Ministry of Finance and the Bank of Israel warned of the dire consequences for the Israeli economy as a result of encouraging extreme and unilateral measures. on the judicial system.
Published by Globes, Israel business news – en.globes.co.il – on April 13, 2023.
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