largest decline .. 2% Loss of the Israeli shekel

The Israeli shekel fell as concerns about judicial reform overshadowed the central bank's larger-than-expected interest rate hike.

The shekel fell about 2%, the largest decline since September and the largest loss among the world's major currencies.

Earlier, lawmakers took a first step toward approving a plan that would give the Israeli government more power over the country's Supreme Court, a move that sparked waves of protests. The measure will still need to pass two more votes before it can become law.

After raising the benchmark interest rate on Monday by 50 basis points to 4.25%, Central Bank Deputy Governor Andrew Abir acknowledged that "political uncertainty" had affected the country's exchange rates and stock markets.

For its part, Citigroup Inc. On the shekel, targeting its decline by 8% to 3.95 against the dollar.

"Despite the Bank of Israel's somewhat surprising 50 basis point hike yesterday, the currency remains under pressure from domestic political noise," Luis Costa and Bhumika Gupta, strategists at Citigroup, said in a report.

• political situation

"It seems likely that the political situation will become more volatile in the coming weeks as judicial reforms approach a second reading in Parliament."

Analysts said that despite the potential for higher interest rates, the expected real price valuation of the currency remains weak compared to many of its emerging market peers, which is discouraging shekel-borne inflows.

weakest price

The currency was trading at 3.6499 per dollar, the weakest price since April 2020.

volume of the currency’s movement

“Continuing judicial reform weighs heavily on the market,” said Peter Kessler, London-based hedge fund manager at Trium Capital.

  “The volume of the currency’s movement was very large, but it could still weaken further.”

Reforms to the justice system

Israel's parliament voted on Monday to move ahead with controversial reforms to the justice system that were endorsed by Prime Minister Benjamin Netanyahu's nationalist government but sparked mass protests that the opposition vowed would continue.