Israel’s currency strengthened after Prime Minister Benjamin Netanyahu said he’ll delay a controversial plan to weaken the judiciary “to avoid a civil war.”
(Bloomberg) —
Israel’s currency strengthened after Prime Minister Benjamin Netanyahu said he’ll delay a controversial plan to weaken the judiciary “to avoid a civil war.”
The shekel rose 1.1% to 3.5448 against the dollar as of 11:54 a.m. in Jerusalem. The yield on the nation’s 10-year local-currency bond fell three basis points to 3.73%, adding to a 17-basis-point drop from Monday.
Netanyahu’s climbdown appeared to calm investor nerves after three tumultuous months of unrest sent the shekel reeling to a three-year low and prompted Moody’s Investors Service and other credit assessors to warn of risks to Israel’s debt rating. Derivatives traders on Tuesday trimmed their bearish wagers on the currency for a second day, according to one-month risk reversals.
Netanyahu will need to achieve a negotiated agreement or abandon the rest of the proposals for Israel’s assets to fully rebound, even though Monday’s “developments are a baby step in the right direction,” according to Wells Fargo Securities.
Anti-government protest leaders have vowed to press on with their campaign. Groups of demonstrators — both in favor and against the proposed overhaul — clashed with police overnight.
In the equities market, the key TA-35 Index slipped 0.2% after advancing 2% on Monday. The yield on the nation’s dollar bond due January 2033 rose about two basis points to 4.53%. The shekel is climbing for a seventh day, its longest winning streak since October 2021.
“There is still a ways to go before political risk materially eases and Israel’s asset prices can recover,” said Brendan McKenna, a New-York based emerging-markets economist and foreign exchange strategist at Wells Fargo Securities. “In the short term, local markets can tread water, but may be impatient to see whether further momentum can be achieved.”
Israel’s bond yields are set to fall and the shekel will likely strengthen toward 3.45 per dollar in the coming months should political risk ease, he said.
–With assistance from Leen Al-Rashdan.
(Adds local-bond yield in second paragraph, stock and dollar debt prices in sixth paragraph.)
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