Shekel drops as Hezbollah hits North

The shekel weakened to 3.64 to the dollar in trading early on Tuesday, a drop of almost 0.6% as Hezbollah fired a barrage of at least 100 rockets at the Golan Heights and the Galilee.

The Israeli currency also lost nearly 0.6% to the euro for an exchange rate of 3.98 shekels.

Alarms sounded in the north and crashes were sighted in open areas of Ein Kuniya, Snir, She’ar Yashuv, and Kfar Szold.

In response, the IDF attacked missile launchers in Lebanon, and jets hit three launchers that had fired toward the Golan, the IDF reported.

Shekel has proven resilient in the past

Israel’s volatile security situation and the threat of war in the north were part of Moody’s downgrade of the country’s credit rating last month. The agency mentioned the looming threat of escalation with Hezbollah in their statement about the rating drop.

“In the past, Israel’s sovereign credit profile has shown resilience to terrorist attacks and military action,” Moody’s analysts said in an October note that accompanied Moody’s placing Israel’s A1 rating on review. “However, a prolonged conflict that durably and significantly impairs economic activity and policymaking would test that resilience.”

The sovereign credit rating is not the only predictor of exchange rates but instability and concern about a country’s economy can lower both the credit rating and demand for the country’s currency.

Reuters contributed to this report.