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Israeli currency falls to three-year low as judicial reforms edge closer

Shekel at weakest point since April 2020 following first parliamentary reading of controversial changes to judiciary
An employee of Bank of Israel holds 50 Shekels' bills during a press conference at the bank's headquarters in Jerusalem on 10 September 2014 (AFP)
The shekel fell to 3.67 against the US dollar before rallying (AFP)

The Israeli shekel continued to fall against the dollar on Wednesday, after reaching a near three-year low a day earlier as the government pressed ahead with controversial judicial reforms

The Israeli currency fell to 3.67 early on Wednesday, before rallying to 3.65 later in the day.

On Tuesday, the shekel lost around two percent of its value, reaching 3.649 per dollar, its weakest since April 2020 and a six percent decline since the beginning of the month. 

Economists and analysts have linked the decline with the Israeli parliament on Monday holding the first of three readings to approve judicial changes proposed by the far-right coalition government. 

If approved, the reforms will give Benjamin Netanyahu's coalition the ability to re-enact laws disqualified by the Supreme Court with a simple majority in the Knesset of 61 MPs (out of 120).

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The fall came despite the Bank of Israel hiking interest rates by 0.5 percent, its eighth consecutive raise since April. 

The bank is seeking to control inflation, which was exacerbated by the Covid-19 pandemic and the Russia-Ukraine war. The fall in the shekel against the dollar may lead to further rises in interest rates, as imports become more expensive. 

On Monday, Foreign Minister Eli Cohen tweeted that he had asked Finance Minister Bezalel Smotrich to draft a plan with the central bank’s governor to stop the rate hikes. 

Smotrich responded that he stood “firmly against populist statements threatening the Bank of Israel’s independence”.

Prime Minister Benjamin Netanyahu echoed the sentiments, stating: “Under my leadership, The Bank of Israel law that guarantees the independence of the monetary committee headed by the governor in determining the interest rate was passed. Nothing will change it.” 

An estimated 100,000 protesters gathered outside the Knesset in Jerusalem on Monday to demonstrate against the judicial reforms. 

The second and third readings of the bills are set for late March, before a final vote in the Knesset. 

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