The weakening Israeli shekel took a further dive on Wednesday, dropping to 3.87 against the US dollar, its lowest rate in seven years.
The dollar had been trading at NIS 3.81 on Sunday. The new rate marked a 1.5 percent jump since the beginning of the week.
Tel Aviv stock index prices also fell, with the TA 125 weakening by 1.5% and the TA 35 weakening 1.3%, while the Tel Aviv-Real Estate and Tel Aviv-Technology industry indexes fell by 2%.
The shekel’s slip against foreign currencies over the past year has already been felt in the price of imported goods such as cars and electrical appliances.
Analysts say the shekel’s poor showing is to a large extent a result of concerns over the ongoing political turmoil surrounding the government’s planned overhaul of the judiciary, which has been met with months of mass protests.
The currency’s devaluation increases inflation and could lead to further interest rate hikes by the central bank.
Avigdor Liberman, chair of the opposition Yisrael Beytenu party and a former finance minister, blasted his successor Bezalel Smotrich, Prime Minister Benjamin Netanyahu, and Knesset Finance Committee chair Moshe Gafni and accused them of ignoring the situation.
“The prime minister is ignoring all the warnings, the finance minister is outlining an economic policy that things will be fine ‘with God’s help,’ and the chair of the Finance Committee is sure that the situation is excellent,” he wrote on X, formerly Twitter. “This government is leading us to complete economic chaos. It’s time for a different leadership that is responsible and professional.”
On Tuesday, Gafni, from the ultra-Orthodox United Torah Judaism party, flatly dismissed an OECD report urging the government to end subsidies for Yeshiva students in order to close socioeconomic gaps, saying those behind it don’t understand that Torah study is the thing that sustained the Jewish people through thousands of years of exile in order to return them to the land of Israel.
Last month, leading US financial institution JPMorgan Chase & Co. warned that the recent weakening of the Israeli shekel may be a sign of long-term trends for the currency.
Citing the ongoing political turbulence in Israel relating to the coalition’s overhaul, the bank said in a note to clients that while the shekel’s movement has largely tracked that of US stocks during the past decade, that relationship may no longer hold as Israeli investors allocate more funds into overseas assets.
The main concern among the business and tech community is that the proposed legislation will erode democracy and weaken checks and balances, which in turn will make venture capitalists and other money-makers leery of investing their money in the country, triggering an outflow of funds.
Foreign investment in Israel dived by 60% in the first quarter of this year, according to a report published by the Finance Ministry in September.