Israel’s foreign currency market in September 2015

Graphs & Data

 
1. The Exchange Rate
Slight strengthening of the shekel against the dollar against the background of the dollar’s mixed trend worldwide.
 
In September, the shekel strengthened slightly by about 0.2 percent against the dollar, and was unchanged against the euro.
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 0.4 percent in September.
In September, there was a mixed trend for the dollar against major currencies — the dollar strengthened by about 1.5 percent against the British pound, and by about 0.9 percent against the Swiss franc. In contrast, the dollar weakened by about 0.1 percent against the euro, and by about 0.9 percent against the Japanese yen.
 
2. Exchange Rate Volatility
An increase in actual volatility of the exchange rate, in parallel with an increase in the implied volatility of the exchange rate.
 
The standard deviation of changes in the shekel-dollar exchange rate, which represents its actual volatility, increased by about 2 percentage points in September, to 9.9 percent at the end of the month.
The average level of implied volatility in over the counter shekel-dollar options––an indication of expected exchange rate volatility––increased by about 1.9 percentage points, to 11.3 percent at the end of September.
The implied volatility in foreign exchange options in emerging markets also increased, to an average of about 12.2 percent in September, while the implied volatility in foreign exchange options in advanced economies also increased, to an average of about 10.4 percent at the end of the month (Figure 4).
 
3. The Volume of Trade in the Foreign Currency Market
Average daily trading volume declined, alongside stability in nonresidents’ relative share of total trading volume.
 
The total volume of trade in foreign currency in September was about $122 billion, compared with about $162 billion in August. Average daily trading volume declined by about 7 percent, to about $7.2 billion.
 
The volume of trade in spot and forward transactions (conversions) was about $39 billion in September. Average daily trading volume in those transactions declined in September by about 10 percent compared with August.
 
The volume of trade in over the counter foreign currency options (which are not traded on the stock exchange) totaled about $5.9 billion in September. The average daily trading volume in those options was about $347 million in September, a decline of about 24 percent compared with August.
 
The trading volume of swap transactions was about $78 billion in September, compared with $100 billion in August. Average daily trading volume declined by about 4 percent from the previous month, to around $4.6 billion.
 
Nonresidents' share of total trade (spot and forward transactions, options and swaps) was stable compared with August, at about 33.9 percent.
 
 08-10-2015-1E.png

 08-10-2015-2E.png

08-10-2015-3E.png

08-10-2015-4E.png

08-10-2015-5E.png

 
 
Forex transactions with domestic banks, by instruments and sectors ($ million)
 
 
 
 
 Conversions (1)
 Swaps[1] (2)
 Cross Currency swap[2] (3)
 Options[3] (4)
Total volume of trade (1)+(2)+(3)+(4)
September
2015
 (Not final)
Total
38,544
77,773
200
5,907
122,424
 Daily average (21 days)
2,267
4,575
12
347
7,201
Nonresidents
13,960
25,054
51
2,500
41,565
 of which Foreign financial institutions
13,308
23,328
51
2,283
38,970
Residents
24,584
52,719
149
3,407
80,859
 of which Real sector
5,627
5,811
149
1,307
12,894
 Financial sector
1,873
9,006
0
82
10,961
 Institutions (incl. insurance companies)
3,798
7,734
0
0
11,532
 Individuals and provident funds
2,556
1,656
0
330
4,542
 Other[4]
7,202
22,484
0
1,265
30,951
 Domestic banks[5]
3,528
6,028
0
423
9,979
August
 2015
Total
52,701
99,865
225
9,642
162,433
 Daily average (23 days)
2,510
4,755
11
459
7,735
Nonresidents
19,211
31,808
150
3,171
54,340
 of which Foreign financial institutions
18,122
31,162
150
2,766
52,200
Residents
33,490
68,057
75
6,471
108,093
 of which Real sector
7,578
6,146
0
2,238
15,962
 Financial sector
2,512
9,474
0
84
12,070
 Institutions (incl. insurance companies)
6,568
10,513
0
116
17,197
 Individuals and provident funds
2,272
2,283
0
423
4,978
 Other4
8,834
31,154
0
2,475
42,463
 Domestic banks5
5,726
8,487
75
1,135
15,423
 

[1]  Only one leg of the swap, i.e., the nominal value of the transaction (in accordance with the BIS definition)
[2]  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.
[3] The national value, that includes purchases and sales of put and call options.
[4] Including other entities such as portfolio managers, nonprofit organizations, national institutions, and those not include elsewhere.
[5] Total interbank trade, divided in two.