In February, there was a 6% decline in the Israeli shekel, which makes it the third worst performing currency globally. The first was the Russian ruble and the second was the Korean won.
This was in light of rising concerns about the country, as the new government continues with their overhaul of the judicial system.
Last week, the currency dropped to a low of three years against the US dollar, as lawmakers in Israel took the first steps for approving legislation, which is a major part of the controversial judicial overhaul.
The said bill is aimed at giving the government the authority to make judicial appointments and revoking the ability of the High Court to review Basic Laws.
There was a weakening in the Shekel, even after an interest rate hike of 50 basis points was delivered by the Bank of Israel.
The interest rate in the country rose to 4.25%, which is the highest since 2008, and it was hiked in an effort for reducing inflation in the country.
Economists have said that the uncertainty associated with the economic impact of the judicial overhaul has had an impact on local market movements.
Previously, the performance of the Shekel had had a close correlation with markets in the United States.
In the monthly report of the Tel Aviv Stock Exchange, it was highlighted that February saw declines in trading due to the price market, a trend that has been seen the second half of January.
There was a 5% drop in the benchmark TA-125 index of the Tel Aviv Stock Exchange, while a 4% fall was also recorded in the blue-chip companies’ index, TA-35.
There was a 9% slump in the TA-90 index, which tracks shares with the highest market cap that are not included in the TA-35 index. It had recorded gains of 1.7% in January.
In February, equity markets saw their daily turnover reach NIS 2.3 billion, which was almost 28% higher than that of January. It was also similar to the average turnover in the previous year.
Recent weeks have seen warnings from leading economists and central bank policymakers about democracy and checks and balances being at risk due to the full implementation of the planned overhaul.
There have been growing concerns amongst investors that there could be a negative impact on the country’s credit rating because of the controversial proposals.
This would harm the economy of Israel and its currency and would result in an outflow of funds. Already, startups and local companies have begun moving their funds out of the country.
Foreign investors in these companies have requested so in order to diversify the risks before the reforms planned are approved.
These include Wiz, the US-Israeli cybersecurity company, which recently hit a valuation of a whopping $10 billion after a funding round that raised $300.
Assaf Rappaport, the co-founder of the unicorn, said that they would keep the funds in its US accounts because of the uncertainty in Israel.