Israel’s foreign currency market in August 2013

To view this press release as a Word document

To Graphs & Data

 

The Exchange Rate
The shekel weakened against the dollar, in parallel with the dollar's strength against global currencies.

The shekel weakened by about 1.4 percent against the dollar, and by about 1.1 percent against the euro during August. 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 weakened by about 0.9 percent.
In August, the dollar strengthened against most global currencies—including by about 0.1 percent against the Swiss franc, by about 0.1 percent against the euro, and by about 0.3 percent against the Japanese yen. However, the dollar weakened by about 2.1 percent against the British pound.

Exchange Rate Volatility
Actual volatility of the exchange rate increased as its implied volatility declined.

The standard deviation of changes in the shekel-dollar exchange rate, which represents its actual volatility, increased in August by about 0.8 percentage points to 8.1 percent, compared with 7.3 percent in July.
The average level of implied volatility in over the counter shekel-dollar options––an indication of expected exchange rate volatility––declined to 8.9 percent at the end of August, compared with 9.6 percent in July.
In August, the implied volatility in foreign exchange options declined in both emerging and advanced economies—to 10.3 percent in emerging markets and 9.4 percent in advanced economies, compared with 11.1 percent in emerging markets and 10 percent in advanced economies in July.

The Volume of Trade in the Foreign Currency Market
Average daily trading volume declined.

The total volume of trade in foreign currency
in August was about $82 billion, compared with about $83.5 billion in July. Average daily trading volume declined by about 2 percent in August, and reached about $3.7 billion.

The volume of trade in spot and forward transactions (conversions)
was about $32 billion in August, compared with $33 billion in July. The average daily trading volume in those transactions declined in August by about 5 percent compared with July. During August, the Bank of Israel bought $290 million through conversion transactions[1], as part of the purchase program intended to offset the effect on the exchange rate of natural gas production.

The volume of trade in over the counter foreign currency options
(which are not traded on the stock exchange) totaled about $9.7 billion in August. The average daily trading volume in those options in August was $443 million, an increase of about 15 percent from its level in July.

The trading volume of swap transactions
was about $40 billion in August. Average daily turnover was unchanged from the previous month, at around $1.8 billion.

Nonresidents' share of total trade
(spot and forward transactions, options and swaps) increased by about 1 percentage point in August to about 34.8 percent.


[1] This figure reflects transactions by trade date, not settlement date. Therefore, it is not necessarily identical to the data published in the foreign exchange reserves notice, which reflects transactions by settlement date.


08-09-2013-11.png

08-09-2013-12.png

08-09-2013-13.png

08-09-2013-14.png

08-09-2013-15.png

 
 
 
 Conversions (1)
 Swaps1 (2)
 Cross Currency swap5 (3)
 Options2 (4)
Total volume of trade (1)+(2)+(3)+(4)
 
August -13
 (Not final)
Total
31,268
40,122
602
9,752
81,744
 
 Daily average (21 days)
1,421
1,824
27
443
3,716
 
Nonresidents
11,345
13,026
0
4,208
28,579
 
 of which Foreign financial institutions
10,627
12,994
0
3,995
27,616
 
Residents
19,923
27,096
602
5,544
53,165
 
 of which Real sector
6,067
3,786
112
2,063
12,028
 
 Financial sector
3,966
7,928
0
1,670
13,564
 
 Institutions (incl. insurance companies)
2,203
4,754
40
0
6,997
 
 Individuals and provident funds
642
142
0
361
1,145
 
 The Bank of Israel
290
0
0
0
290
 
of which: Within the program to offset the effect of natural gas production
290
0
0
0
290
 
 Other3
3,071
31
0
104
3,206
 
 Domestic banks4
3,684
10,455
450
1,346
15,935
 
 
 
 
 
 
 
 
 
July
2013
Total
33,007
40,794
1,003
8,468
83,272
 
 Daily average (20 days)
1,500
1,854
46
385
3,785
 
Nonresidents
11,392
12,872
190
3,848
28,302
 
 of which Foreign financial institutions
10,765
12,867
190
3,824
27,646
 
Residents
21,615
27,922
813
4,620
54,970
 
 of which Real sector
6,027
3,854
538
2,161
12,580
 
 Financial sector
4,890
8,349
0
1,347
14,586
 
 Institutions (incl. insurance companies)
2,601
5,227
0
1
7,829
 
 Individuals and provident funds
646
341
0
321
1,308
 
 The Bank of Israel
255
0
0
0
255
 
of which: Within the program to offset the effect of natural gas production
255
0
0
0
255
 
 Other3
3,294
62
0
37
3,393
 
 Domestic banks4
3,902
10,089
275
753
15,019
1 Only one leg of the swap, i.e., the nominal value of the transaction (in accordance with the BIS definition).
 
2 The notional value, that includes purchases and sales of put and call options.
 
3 Including other entities such as portfolio managers, nonprofit organizations, national institutions, and those not included elsewhere.
 
4 Total interbank trade, divided by 2
 
5 The exchanged founds through Cross Currency Swap transactions considered for the volume, as one leg only in cases where the two legs offset each other.