Israel’s foreign currency market in September 2017

1. The Exchange Rate

Strengthening of the shekel against the dollar, while the dollar strengthened worldwide.

In September, the shekel strengthened by 2.4 percent against the euro, and by 1.9 percent against the dollar.

Against the currencies of Israel's main trading partners, in terms of the nominal effective exchange rate of the shekel (i.e., the trade-weighted average shekel exchange rate against those currencies), the shekel strengthened by about 2.2 percent in September.

Worldwide, the US dollar strengthened against most major currencies in September. The dollar strengthened by 0.6 percent against the euro, by 0.6 percent against the Swiss franc, and by 1.9 percent against the Japanese yen.  In contrast, it weakened by 4.4 percent against the British pound,

 

 

2. Exchange Rate Volatility

An increase in actual volatility of the exchange rate, in parallel with an increase in implied volatility.

The standard deviation of changes in the shekel-dollar exchange rate, which represents its actual volatility, increased by about 0.5 percentage points in September, to 6.7 percent at the end of the month.

The average level of implied volatility in over the counter shekel-dollar options increased by about 0.1 percentage points, to 7.5 percent at the end of September.

In parallel, the implied volatility in foreign exchange options in emerging markets also increased, to an average of about 8.9 percent in September, and the implied volatility in foreign exchange options in advanced economies increased, to about 8.5 percent at the end of September (Figure 4).

The implied volatility in foreign exchange options trading is an indication of expected exchange rate volatility.

 

 

3. The Volume of Trade in the Foreign Currency Market

Total trading volume declined, with a decline in nonresidents’ relative share of total trading volume.

Total trading volume in foreign currency in September was about $123 billion, compared with about $147 billion in August.[1] Average daily trading volume increased by about 8 percent, to about $7.2 billion.

The trading volume in spot and forward transactions (conversions) was about $27 billion in September. Average daily trading volume in those transactions increased in September by about 7 percent compared with August.

 

The trading volume in over the counter foreign currency options (which are not traded on the stock exchange) totaled about $7.1 billion in September. The average daily trading volume in those options increased compared with August, to about $415 million.

The trading volume in swap transactions totaled about $88 billion in September, compared with about $106 billion in August. Average daily trading volume in swap transactions increased by about 7 percent compared with the previous month, to around $5.2 billion.

Nonresidents' share of total trade (spot and forward transactions, options and swaps) declined to about 36 percent at the end of September. The decline was a result of lower volume of activity by nonresidents in conversion and swap transactions.


Full press release, including graphs and data

Graphs and data​

 



[1] Due to the autumn holidays in September, trading hours were reduced relative to the previous month.