Shekel Loses Ground, USD/ILS Implied Vols Creep Higher Again

USD/ILS implied volatilities are rising again as the Israeli political crisis continues to simmer, while the spot rate edges higher after catching a breather over the past three days. The pair last deals +239 pips at ILS3.6410, with bulls setting their sights on Feb 27 high of ILS3.6935.

• PM Netanyahu rejected Attorney-General's opinion linking his corruption trial and judicial overhaul as "theoretical, speculative and very far-fetched" a day after parliament greenlighted further work on a bill to prevent the High Court of Justice from being able to suspend the Prime Minister from office.
• The latest escalation of violence in the West Bank and regional geopolitical concerns boost the political risk premium baked into the shekel. Bloomberg ran a source report today noting that Israeli officials believe that the window for a potential strike on Iranian nuclear sites would narrow if Tehran is successful in its push for Russian S-400 air defence systems.
• A group of hundreds of Israeli economists, including a suite of former senior officials, signed a letter warning that the judicial overhaul could trigger a financial crisis, which would hit Israel "more powerfully and faster" than forecast earlier amid "first signs of capital flight that compels the Bank of Israel to continue raising interest rates at a fast pace."
• The shekel was the third-worst performer on Bloomberg's expanded list of 31 major currencies in February, with only the RUB and KRW faring worse.