{"id":73722,"date":"2026-10-27T22:08:19","date_gmt":"2026-10-28T02:08:19","guid":{"rendered":"https:\/\/www2.stockmarketwatch.com\/stock-market-news\/global-markets-react-to-israeli-election-deadlock-and-central-bank-policy-shifts\/73722\/"},"modified":"2026-10-27T22:08:19","modified_gmt":"2026-10-28T02:08:19","slug":"global-markets-react-to-israeli-election-deadlock-and-central-bank-policy-shifts","status":"publish","type":"post","link":"https:\/\/www2.stockmarketwatch.com\/stock-market-news\/global-markets-react-to-israeli-election-deadlock-and-central-bank-policy-shifts\/73722\/","title":{"rendered":"Global Markets React to Israeli Election Deadlock and Central Bank Policy Shifts"},"content":{"rendered":"<h2>Key Takeaways<\/h2>\n<ul>\n<li><strong>Israel\u2019s shekel (USD\/ILS) weakened 1% to 3.084<\/strong> as exit polls from the October 27 election indicated a political deadlock between Prime Minister <strong>Benjamin Netanyahu<\/strong> and challenger <strong>Gadi Eisenkot<\/strong>.<\/li>\n<li><strong>Taiwan\u2019s Central Bank<\/strong> revealed that <strong>80% of its $600.75 billion foreign exchange reserves<\/strong> are held in <strong>U.S. bonds<\/strong>, emphasizing the island&#39;s reliance on dollar-denominated assets.<\/li>\n<li><strong>Governor Yang Chin-long<\/strong> clarified that Taiwan\u2019s <strong>2% inflation level<\/strong> is a benchmark rather than a hard ceiling, signaling flexibility as consumer prices remain elevated.<\/li>\n<li><strong>Japanese 10-year government bond (JGB) yields rose 4 basis points to 2.825%<\/strong>, driven by a rebound in technology shares and anticipation of upcoming central bank meetings.<\/li>\n<li><strong>Foreign institutional investors<\/strong> have withdrawn approximately <strong>$54.3 billion<\/strong> from Taiwan\u2019s financial markets since July, putting significant downward pressure on the New Taiwan Dollar.<\/li>\n<\/ul>\n<h2>Israeli Election Stalemate Rattles Currency Markets<\/h2>\n<p>The Israeli shekel faced immediate selling pressure on Wednesday after exit polls suggested no clear path to a majority for either major bloc in the 120-seat Knesset. The <strong>USD\/ILS<\/strong> pair gained <strong>1% to reach 3.084<\/strong> as investors braced for weeks of political horse-trading or the potential for a caretaker government under <strong>Benjamin Netanyahu<\/strong>.<\/p>\n<p>Market analysts noted that the deadlock comes at a sensitive time, with regional tensions involving Iran already keeping risk premiums high. A prolonged period of political uncertainty could further impact domestic stocks and global <a href=\"https:\/\/stockmarketwatch.com\/energy\/crude-oil\" data-internallinksmanager029f6b8e52c=\"12\" title=\"Crude oil\">oil prices<\/a>, which settled near <strong>$113.88<\/strong> per barrel as the vote concluded.<\/p>\n<h2>Taiwan Central Bank Signals Policy Flexibility<\/h2>\n<p>Taiwan Central Bank Governor <strong>Yang Chin-long<\/strong> addressed the Legislative Yuan on Wednesday, clarifying the bank&#39;s stance on rising prices. He stated that the bank has <strong>never ruled out inflation remaining above 2%<\/strong>, describing the figure as a &quot;benchmark&quot; rather than a rigid limit.<\/p>\n<p>This pragmatic approach comes as Taiwan&#39;s headline inflation was forecast at <strong>2.03% for 2026<\/strong>, fueled by an AI-driven economic boom that has seen GDP growth projections raised to <strong>11.48%<\/strong>. The bank opted to keep its benchmark interest rate at <strong>2.000%<\/strong> to support traditional industries that have not benefited equally from the technology surge.<\/p>\n<h2>Reserve Management and Capital Outflows<\/h2>\n<p>In a detailed report on reserve management, the Central Bank of the Republic of China (Taiwan) confirmed that <strong>80% of its foreign exchange reserves<\/strong>\u2014which totaled <strong>$600.75 billion<\/strong> at the end of September\u2014are invested in <strong>U.S. government bonds<\/strong>. The bank cited the liquidity and safety of U.S. debt as primary reasons for this heavy concentration.<\/p>\n<p>The report also highlighted a massive wave of capital flight, with foreign institutional investors pulling <strong>$54.3 billion<\/strong> out of Taiwan since July. These outflows, largely driven by geopolitical concerns and a global sell-off in AI-related stocks, have forced the central bank to intervene by selling <strong>$17.04 billion<\/strong> in the first half of the year to stabilize the local currency.<\/p>\n<h2>Japanese Yields Climb Amid Tech Rebound<\/h2>\n<p>In Tokyo, the <strong>10-year Japanese Government Bond (JGB)<\/strong> yield rose to <strong>2.825%<\/strong>, a 4-basis-point increase. The move was attributed to a recovery in semiconductor and AI-related equities, which reduced the demand for safe-haven assets like sovereign debt.<\/p>\n<p>Investors are now looking toward the <strong>Bank of Japan&#39;s<\/strong> upcoming policy meeting. While a pause is expected this week following September&#39;s rate hike to <strong>1.25%<\/strong>, many market participants are pricing in a further increase to <strong>1.5%<\/strong> by December to combat persistent cost-push inflation.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Key Takeaways Israel\u2019s shekel (USD\/ILS) weakened 1% to 3.084 as exit polls from the October 27 election indicated a political 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