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Israel shekel nears three-year low against the US dollar

The shekel slid 1.9 per cent against the dollar to a nearly three-year low on Tuesday after Israel pressed ahead with its judiciary overhaul plan, even as the finance minister said it would help the economy and promised to protect the country’s central bank independence.

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The shekel stood at 3.645 per dollar in afternoon trading, its weakest level since April 2020 and down 5.5 per cent this month. It also fell 1.5 per cent versus the euro. Government bond prices were down as much as 2.1 per cent and Tel Aviv share indices slipped 1.1 per cent.

Israel’s parliament late on Monday held a first reading of three approving the judicial changes that would give the government greater sway on selecting judges while limiting the Supreme Court’s power to strike down legislation.

At the same time, Foreign Minister Eli Cohen criticised the central bank for raising its benchmark interest rate again and called for a process that would halt further hikes, drawing rebuke from Finance Minister Bezalel Smotrich.

“One must not even hint at hurting the Bank of Israel’s independence because that is key to our economic stability,” he said at a conference in Jerusalem after he Tweeted that he would safeguard the bank’s autonomy against populism.

Smotrich hailed the judicial overhaul by Prime Minister Benjamin Netanyahu’s nationalist-religious government that has sparked nationwide protests and alarmed economists, legal experts and former security officials.

Seeing instability from the reform feud, economists and high-tech and banking leaders have warned of investor and capital flight with a weaker shekel aggravating already high living costs, but Smotrich downplayed these concerns.

“If there will be temporary damage it won’t be because of the reform, it will be because of irresponsible campaigners who want to hurt the economy and then say ‘we told you so’,” he said as some of the crowd booed while also blaming the media.

The government says the reforms are designed to end overreach into politics by an elitist Supreme Court. Smotrich said they would boost business by cutting back unnecessary litigation.

Critics say Netanyahu - who is on trial on graft charges that he denies - seeks legal changes that will hurt Israel’s democratic checks and balances, foster corruption and bring diplomatic isolation.

In an interview with Reshet13 on Monday, Bank of Israel Governor Amir Yaron urged policymakers to safeguard institutional autonomy, both of the central bank and the supreme court, and reach broad understandings on the overhaul.

Successive polls have shown a minority of Israelis support the proposed changes with many backing compromise. — Reuters

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