Israel’s foreign currency market in November 2013

To view this press release as a Word document

Graphs & Data

1. The Exchange Rate
The dollar strengthened against the shekel, in parallel with the dollar's strength against global currencies.
 
The shekel weakened by about 0.1 percent against the dollar, and was unchanged against the euro during November. 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 0.4 percent.
In November, the dollar strengthened against most global currencies—including by about 0.1 percent against the Swiss franc and by about 0.1 percent against the euro, and by about 4.1 percent against the Japanese yen, but weakened by about 1.6 percent against the British pound.

2. Exchange Rate Volatility
Actual volatility of the exchange rate increased, in contrast with a decline in its implied volatility.
 
The standard deviation of changes in the shekel-dollar exchange rate, which represents its actual volatility, increased in November by about 0.7 percentage points to 4.7 percent.
The average level of implied volatility in over the counter shekel-dollar options––an indication of expected exchange rate volatility––declined to 8.2 percent at the end of November, compared with 8.6 percent in October.
In November, the implied volatility in foreign exchange options in emerging markets also declined, reaching 9.1 percent on average, compared with 9.6 percent in October.  The implied volatility in foreign exchange options in advanced economies declined to 7.8 percent in November, compared with 8 percent in October.

3. The Volume of Trade in the Foreign Currency Market
Average daily trading volume declined, in parallel with a decline in non-residents’ share of total trading volume
 
The total volume of trade in foreign currency in November was about $80 billion, compared with about $90 billion in October. Average daily trading volume declined by about 3 percent in November, and reached about $3.8 billion.
 
The volume of trade in spot and forward transactions (conversions) was about $31 billion in November, compared with $32 billion in October. The average daily trading volume in those transactions increased in November by about 6 percent compared with October. During November, the Bank of Israel bought $270 million through conversion transactions[1], as part of the purchase program intended to offset the effect of natural gas production on the exchange rate.
 
The volume of trade in over the counter foreign currency options (which are not traded on the stock exchange) totaled about $11 billion in November. The average daily trading volume in those options in November was $527 million, an increase of about 60 percent from its level in October.
 
The trading volume of swap transactions was about $37 billion in November. Average daily turnover declined from the previous month, to around $1.8 billion.
 
Nonresidents' share of total trade (spot and forward transactions, options and swaps) declined in November from the previous month, to about 38 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.


8-12-2013-11.png

8-12-2013-2.png
8-12-2013-3.png

8-12-2013-4.png

8-12-2013-5.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)
November
2013
 (Not final)
Total
31,372
36,785
979
11,074
80,210
 Daily average (21 days)
1,494
1,752
47
527
3,820
Nonresidents
13,024
12,208
160
4,897
30,289
 of which Foreign financial institutions
12,299
12,191
160
4,771
29,421
Residents
18,348
24,577
819
6,177
49,921
 of which Real sector
5,784
3,989
0
1,826
11,599
 Financial sector
3,310
7,767
182
1,351
12,610
 Institutions (incl. insurance companies)
1,823
4,336
0
60
6,219
 Individuals and provident funds
510
219
0
274
1,003
 The Bank of Israel
270
0
0
0
270
of which within the program to offset the gas effect
270
0
0
0
270
 Other[4]
2,986
49
150
1,122
4,307
 Domestic banks[5]
3,665
8,217
487
1,544
13,913
October 2013
Total
32,494
50,213
269
7,579
90,555
 Daily average (23 days)
1,413
2,183
12
330
3,937
Nonresidents
11,410
21,762
170
2,798
36,140
 of which Foreign financial institutions
10,646
21,720
170
2,701
35,237
Residents
21,084
28,451
99
4,781
54,415
 of which Real sector
6,091
4,107
58
1,927
12,183
 Financial sector
4,292
8,384
0
1,595
14,271
 Institutions (incl. insurance companies)
3,246
6,486
10
78
9,820
 Individuals and provident funds
514
459
0
254
1,227
 The Bank of Israel
560
0
0
0
560
of which within the program to offset the gas effect
260
0
0
0
260
 Other4
3,217
39
0
139
3,395
 Domestic banks5
3,164
8,976
31
788
12,959


[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.