Israel’s currency weakened after Prime Minister Benjamin Netanyahu said his government would push ahead with a contentious plan to reshape the judicial system.
The shekel slumped 1.3% to around 3.60 per dollar as of 11:36 a.m. in Tel Aviv, one of the worst performers in global currency markets on Monday. Israeli stocks erased their early losses, after sliding 1.1% on Sunday.
Netanyahu said he was set to take “practical steps” this week “to implement our plan to repair the judicial system.”
The initiative has prompted mass protests by critics who say it would reduce the independence of judges, and unnerved tech and other investors. The shekel has depreciated almost 7% since late January.
Netanyahu’s cabinet, widely seen as Israel’s most right-wing ever, says the courts have amassed too much power. As a result, the government is seeking to increase its role in selecting judges.
Opposition lawmakers halted negotiations last week after parliament — at Netanyahu’s bidding — elected only one, not two, of its representatives to a panel that makes crucial bench appointments.
The proposal adds to worries for allies after a year that the United Nations says was among the deadliest for Palestinians in the Israeli-occupied West Bank, land the Palestinians see as the core of a future state.
The US is “deeply troubled” by the Israeli government’s decision to advance planning for over 4,000 settlement units in the West Bank, according to a statement on Sunday from the State Department.
Meanwhile on Monday morning, Palestinian officials said three Palestinians were killed and dozens injured in fighting with Israeli forces in the West Bank city of Jenin, in one of the more intense clashes this year.
Israeli forces had entered the city to arrest two suspects when they were targeted with explosive devices, Israel’s military and border police said in a statement. The soldiers on the ground opened fire, and Israeli military helicopters shot at Palestinians from the air, Israeli officials said.
Currency Outlook
With concerns over higher US interest rates contributing to the shekel’s losses, the currency’s performance has become detached from some of the strongest economic fundamentals in emerging markets, according to BNY Mellon.
“We believe the current risk environment has peaked for now,” said Geoffrey Yu, a currency and macro strategist at BNY Mellon in London. “We would not aggressively pursue shekel shorts from these levels.”
Still, traders boosted wagers on further depreciation in the Israeli currency. The extra cost to protect against shekel declines over the coming month — versus hedging against gains — rose to 1.7 percentage points from 1.5 at the end of last week.
--With assistance from Fadwa Hodali.
(Updates with US comments, analyst quote after chart.)
