On Thursday evening, the shekel declined after Prime Minister Benjamin Netanyahu stated that the government would push forward with the controversial piece of judicial overhaul legislation.
Earlier, the currency had recorded gains in expectation of Defense Minister Yoav Gallant making a public call to put a stop to the legislation.
Over several hours, there were sharp swings recorded in the shekel, as investor sentiment took a hit after the premier’s speech.
There had been a 2% rise in the shekel against the US dollar before a planned speech by the Defense Minister and the stock indices in Israel also closed higher.
There was a 2.1% rise in the benchmark TA-125 index of the Tel Aviv Stock Exchange, while the index of blue-chip companies, TA-135, also rose by 1.8%.
A 3.6% rise was recorded in the TA-Bank index, tracking the five biggest banks in Israel. The increases came amidst media reports that Gallant had decided to stop the overhaul.
This was in light of the increasing concerns in the military about the potential disintegration of the reserve forces of the military because of the changes that would happen in the balance of powers.
Unfortunately, Gallant had been summoned by Netanyahu and his office announced that his speech would be postponed.
The Prime Minister then delivered his own speech in which he promised to move ahead with the key legislation aimed at giving the government control of judicial appointments.
The coalition is expected to pass this particular law in the next week. In his speech, the premier attempted to assuage the fears of the opposition.
He promised that he would intervene to ensure the legislation remains balanced and does not turn Israel into a dictatorship by granting undue power to the coalition.
After the premier’s speech, there was a decline in the shekel, as it dropped to NIS 3.62 against the US dollar. Stock markets were already closed for the weekend and were scheduled to open on Sunday.
There has been a continuous decline in the shekel because of investor concerns and this has made it one of the worst performing major currencies in the world so far this year.
Senior Treasury officials had also warned the Finance Minister on Monday about the impact on economic growth in Israel and that the overhaul would result in significant losses in tax revenue.
This week, intraday trading saw the shekel drop to NIS 3.7 against the dollar, which is the weakest level the currency has recorded in four years.
Last week, Amir Yaron, the Governor of the Bank of Israel, had also warned that the overhaul legislation was ‘hasty’.
He stated that it was important for the process to be widely-agreed-upon and orderly because that would prevent companies from moving their investments out of Israel.
This is a major concern, as there are already a number of prominent companies that have announced their decision of shifting their funds out of Israel in light of the judicial overhaul concerns.