Israel’s foreign currency market in November 2014

Graphs & Data

1. The Exchange Rate
The dollar strengthened against the shekel, in parallel with strengthening of the dollar worldwide.
 
In November, the shekel weakened by about 2.8 percent against the dollar, and by about 1.7 percent against the euro. Thus, this month as well there was a continuation of the trend of depreciation of the shekel vis-à-vis the dollar, with a cumulative depreciation since the end of July of 13.4 percent.
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 1.4 percent in November, and by about 8 percent since the end of July.
Globally, the dollar strengthened in November against most currencies—including by about 1.0 percent against the euro, by about 0.6 percent against the Swiss franc, by about 1.8 percent against the British pound, and by about 6.0 percent against the Japanese yen.
 
2. Exchange Rate Volatility
A decline 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, declined in November by about 3 percentage points, to 6.0 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 to 8.5 percent at the end of November, compared with 7.9 percent in October.
The implied volatility in foreign exchange options in emerging markets remained unchanged, at 8.3 percent on average. In contrast, the implied volatility in foreign exchange options in advanced economies increased in November, to 8.3 percent at the end of the month (see Figure 4).
 
3. The Volume of Trade in the Foreign Currency Market
Total trading volume declined, and nonresidents’ share of trading volume increased.
 
The total volume of trade in foreign currency in November was about $137 billion, compared with about $142 billion in October. Average daily trading volume declined by about 3 percent in November, to about $6.8 billion.
 
The volume of trade in spot and forward transactions (conversions) was about $38 billion in November. The average daily trading volume in those transactions declined in November by about 16 percent compared with October.  During November, the Bank of Israel purchased $150 million in spot and forward transactions[1], as part of the purchasing program intended to offset the effects 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 was about $580 million in November, virtually unchanged from October.
 
The trading volume of swap transactions was about $88 billion in November, compared with $85 billion in October. Average daily turnover increased by about 3 percent from the previous month, to around $4.4 billion.
 
Nonresidents' share of total trade (spot and forward transactions, options and swaps) increased in November, to about 32 percent, compared with about 30 percent in October (see Figure 5).
 
08-12-2014-1E.png

08-12-2014-2E.png

08-12-2014-3E.png



08-12-2014-4E.png

08-12-2014-5E.png

08-12-2014-6E.png

 
Forex transactions with domestic banks, by instruments and sectors
($ million) 
 
 
 
 Conversions (1)
 Swaps[2] (2)
 Cross Currency swap[3] (3)
 Options[4] (4)
Total volume of trade (1)+(2)+(3)+(4)
November
2014
 (Not final)
Total
37,661
87,571
631
11,518
137,381
 Daily average (20 days)
1,883
4,379
32
576
6,869
Nonresidents
15,160
24,570
140
3,655
43,525
 of which Foreign financial institutions
14,505
24,064
140
3,648
42,357
Residents
22,501
63,001
491
7,863
93,856
 of which Real sector
6,292
8,353
202
3,644
18,491
 Financial sector
5,677
36,269
89
2,812
44,847
 Institutions (incl. insurance companies)
1,910
7,503
0
40
9,453
 Individuals and provident funds
969
2,787
0
401
4,157
 The Bank of Israel
150
0
0
0
150
of which within the program to offset the gas effect
150
0
0
0
150
 Other[5]
3,040
18
0
119
3,177
 Domestic banks[6]
4,463
8,071
200
847
13,581
October
 2014
Total
44,782
85,164
848
11,356
142,150
 Daily average (20 days)
2,239
4,258
42
568
7,108
Nonresidents
18,426
20,161
388
3,986
42,961
 of which Foreign financial institutions
17,835
19,017
388
3,940
41,180
Residents
26,356
65,003
460
7,370
99,189
 of which Real sector
6,995
8,056
10
3,185
18,246
 Financial sector
5,205
41,473
250
2,484
49,412
 Institutions (incl. insurance companies)
4,264
5,288
0
75
9,627
 Individuals and provident funds
876
3,777
0
437
5,090
 The Bank of Israel
280
0
0
0
280
of which within the program to offset the gas effect
280
0
0
0
280
 Other4
3,192
17
0
138
3,347
 Domestic banks5
5,544
6,392
200
1,051
13,187

 

 


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