The exchange rate of Israeli shekel to USD on the international forex market has fallen to its lowest since April 2020. The USD/ILS pair rose 2.1% to 3.65 Israeli shekels per dollar at the high on February 21. The rise declined to 1.6% to 3.63.

According to Bloomberg calculations, the drop in the Israeli shekel was the steepest since September and the biggest decline among major world currencies. Fears over revision of the judicial system in the country had a negative impact on the rate, which outweighed the effect of the central bank’s interest rate hike.

On Monday, Feb. 20, the Bank of Israel raised its rate by 50 basis points to 4.25 percent, the highest level since late 2008. This was the eighth increase since last April, which affected the Israeli shekel-to dollar rate. Andrew Abir, deputy governor of the central bank, said that “political uncertainty” has affected the exchange rate of the national currency and stock markets. 

He said that interest rates could be raised further as inflation remains above 5 percent. Inflation in Israel reached a 2008 high of 5.4% in January, exceeding the official annual target of 1-3%.

The Israeli Parliament (Knesset) on Monday approved the first reading of the first part of judicial reform. The bill changes the process for appointing Supreme Court judges and expands the government’s authority to select them.

Analysts at Citigroup (NYSE:C) expect the shekel to weaken further, predicting a drop of another 8% to 3.95 shekels per dollar. Despite a 50 basis point increase in the Bank of Israel rate, the currency continues to be under pressure from political news; Citigroup strategists Louis Costa and Bhumika Gupta said.

Earlier we reported that the dollar is stable as long as the Fed hawks are in control.