Shekel Continues To Falter On Security, Politics Risks

The shekel has been offered today, extending yesterday's losses registered as Lt. General Herzi Halevi said at an annual security conference that Israel could take action to prevent Iran from acquiring nuclear weapons. On top of that, Prime Minister Benjamin Netanyahu pledged to resume works on his contentious judicial overhaul after the Knesset cleared the 2023/24 budget bill.

• Spot USD/ILS hit fresh cyclical highs at ILS3.7371 today before trimming gains and last sits +200 pips at ILS3.7210. The recent upswing clears the way to Mar 17, 2020 high of ILS3.8894. On the flip side, bears look for a pullback towards the 50-DMA at ILS3.6368.
• Opposition leaders cried foul as Prime Minister Netanyahu brushed away speculation that he might quietly bury the controversial judicial reforms. The Premier confirmed that they would return to the legislative agenda after parliament approved the state budget. He added that the government is "trying to reach understandings" with the opposition, as negotiations brokered by President Isaac Herzog drag on.
• BoI Deputy Governor Andrew Abir yesterday told Bloomberg that the shekel took a hit from the government's judicial overhaul, with institutional investors changing their behaviour due to the resultant political uncertainty. Abir noted that "they didn't sell as many dollars to hedge their foreign exchange exposure as they would normally have," which caused shekel depreciation. The official suggested that political uncertainty prompted the central bank to hike rates more than expected.