Israel’s foreign currency market in July 2015

Graphs & Data

1. The Exchange Rate
Weakening of the shekel against the dollar in parallel with strengthening of the dollar worldwide.
 
In July, the shekel weakened by about 0.4 percent against the dollar. The shekel strengthened by about 1.9 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 1.6 percent in July.
In July, the dollar strengthened against most major currencies—by about 2.3 percent against the euro, by about 3.9 percent against the Swiss franc, by about 0.9 percent against the British pound and by about 1.5 percent against the Japanese yen.
 
2. Exchange Rate Volatility
A decline 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 in July by about 2.5 percentage points, to 5.9 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––declined to 8.9 percent at the end of July.
The implied volatility in foreign exchange options in emerging markets declined to 10.1 percent in July, and the implied volatility in foreign exchange options in advanced economies also declined, to about 9.8 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 stability in nonresidents’ relative share of total trading volume.
 
The total volume of trade in foreign currency in July was about $127 billion, compared with about $132 billion in June. Average daily trading volume declined by about 8 percent, to about $5.5 billion.
 
 
 
The volume of trade in spot and forward transactions (conversions) was about $38 billion in July. Average daily trading volume in those transactions declined in July by about 21 percent compared with June.
 
The volume of trade in over the counter foreign currency options (which are not traded on the stock exchange) totaled about $6 billion in July. The average daily trading volume in those options was about $260 million in July, a decline of about 26 percent from June.
 
The trading volume of swap transactions was about $83 billion in July, compared with $78 billion in June. Average daily trading volume increased by about 3 percent from the previous month, to around $3.6 billion.
 
Nonresidents' share of total trade (spot and forward transactions, options and swaps) declined in July, to about 34 percent.
 
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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)
July
2015
 (Not final)
Total
37,950
83,506
60
5,925
127,441
 Daily average (23 days)
1,650
3,631
3
258
5,541
Nonresidents
12,342
28,843
60
2,213
43,458
 of which Foreign financial institutions
11,256
27,871
60
2,006
41,193
Residents
25,608
54,663
0
3,712
83,983
 of which Real sector
8,465
15,361
0
1,523
25,349
 Financial sector
1,931
10,408
0
603
12,942
 Institutions (incl. insurance companies)
5,331
8,105
0
163
13,599
 Individuals and provident funds
838
1,799
0
416
3,053
 Other[4]
5,470
12,664
0
609
18,743
 Domestic banks[5]
3,573
6,326
0
398
10,297
June
 2015
Total
46,165
77,738
917
7,670
132,490
 Daily average (22 days)
2,098
3,534
42
349
6,022
Nonresidents
16,005
27,165
386
2,594
46,150
 of which Foreign financial institutions
14,374
26,091
311
2,286
43,062
Residents
30,160
50,573
531
5,076
86,340
 of which Real sector
8,186
15,378
0
2,247
25,811
 Financial sector
3,024
7,533
501
47
11,105
 Institutions (incl. insurance companies)
5,755
10,710
0
1
16,466
 Individuals and provident funds
1,240
964
0
425
2,629
 Other4
7,643
8,806
0
1,718
18,167
 Domestic banks5
4,312
7,182
30
638
12,162
 


[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.