Israel’s foreign currency market in October 2015

Graphs & Data 

 

1. The Exchange Rate
Strengthening of the shekel against the dollar against the background of the dollar’s mixed trend worldwide.
 
In October, the shekel strengthened by about 1.4 percent against the dollar, and by about 3.4 percent 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 1.5 percent in October.
In October, the dollar strengthened by 2 percent against the euro and by 1.4 percent against the Swiss franc. In contrast, the dollar weakened by 1 percent against the British pound, and by 1.8 percent against the Canadian dollar.
 
2. Exchange Rate Volatility
A decrease in actual volatility of the exchange rate, in parallel with a decline in the implied volatility of the exchange rate.
 
The standard deviation of changes in the shekel-dollar exchange rate, which represents its actual volatility, declined by about 1.5 percentage points in October, to 8.2 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––declined by about 0.2 percentage points, to 11 percent at the end of October.
The implied volatility in foreign exchange options in emerging markets also declined, to an average of about 11.3 percent in October, while the implied volatility in foreign exchange options in advanced economies also decline, to an average of about 9.4 percent at the end of the month (Figure 4).
 
3. The Volume of Trade in the Foreign Currency Market
Average daily trading volume declined, in parallel with a decline in nonresidents’ relative share of total trading volume.
 
The total volume of trade in foreign currency in October was about $134 billion, compared with about $124 billion in September. Average daily trading volume declined by about 13 percent, to about $6.3 billion.
 
The volume of trade in spot and forward transactions (conversions) was about $40 billion in October. Average daily trading volume in those transactions declined in October by about 17 percent compared with September.
 
The volume of trade in over the counter foreign currency options (which are not traded on the stock exchange) totaled about $8.5 billion in October. The average daily trading volume in those options was about $406 million in October, a decline of about 5.3 percent compared with September.
 
The trading volume of swap transactions was about $85 billion in October, compared with $78 billion in September. Average daily trading volume declined by about 11 percent from the previous month, to around $4 billion.
 
Nonresidents' share of total trade (spot and forward transactions, options and swaps) declined by about 2.5 percentage points, to about 31.2 percent at the end of October.

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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)
October
2015
 (Not final)
Total
39,608
85,494
190
8,516
133,808
 Daily average (21 days)
1,886
4,071
9
406
6,372
Nonresidents
12,872
25,860
120
2,849
41,701
 of which Foreign financial institutions
11,970
25,491
120
2,736
40,317
Residents
26,736
59,634
70
5,667
92,107
 of which Real sector
6,272
7,331
70
1,742
15,415
 Financial sector
1,765
8,912
0
73
10,750
 Institutions (incl. insurance companies)
5,318
10,568
0
357
16,243
 Individuals and provident funds
2,493
2,975
0
589
6,057
 Other
7,272
23,642
0
2,373
33,287
 Domestic banks
3,616
6,206
0
533
10,355
September
 2015
Total
38,574
77,765
200
7,277
123,816
 Daily average (17 days)
2,269
4,574
12
428
7,283
Nonresidents
13,959
25,049
51
2,825
41,884
 of which Foreign financial institutions
13,307
23,323
51
2,504
39,185
Residents
24,615
52,716
149
4,452
81,932
 of which Real sector
5,609
5,802
149
1,395
12,955
 Financial sector
1,873
9,008
0
82
10,963
 Institutions (incl. insurance companies)
3,794
7,733
0
0
11,527
 Individuals and provident funds
2,578
1,654
0
360
4,592
 Other
7,233
22,491
0
2,192
31,916
 Domestic banks
3,528
6,028
0
423
9,979
 
 


[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.