Israel's foreign currency market in June 2009

7.7.09
 
Israel’s foreign currency market in June 2009
 
  The shekel appreciated against the dollar by about 1 percent in June 2009, and depreciated against the euro by about 1.1 percent.
  Currency conversions totaled about $38 billion in June, similar to the average monthly amount in January–May.
  The shekel exchange rate became more volatile in June; expected volatility, reflected by the implied volatility of shekel/dollar options, was not significantly different from that in the previous month.
Exchange rate developments
In June 2009 the shekel appreciated against the dollar by about 1 percent, and depreciated against the euro by about 1.1 percent. The nominal effective exchange rate of the shekel, which shows the change in the shekel against the currencies of Israel's main trading partners, showed shekel depreciation of 0.3 percent. Since the beginning of 2009 the shekel depreciated against the dollar by about 3.1 percent, against the euro by about 4.5 percent, and in terms of the nominal effective exchange rate, by about 4.5 percent.
The volume of trade in Israel's forex market
The volume of foreign currency conversions totaled about $38 billion in June 2009, similar to the average monthly amount in January–May. Over-the-counter (OTC) options (not traded in the stock exchange) totaled about $10 billion.
The volume of swap transactions surged in June. This was due mainly to the activity of foreign financial institutions, which totaled about $41 billion, compared with an average monthly amount of about $19 billion in January–May. Nonresidents' share of total turnover rose from 54 percent in May to about 59 percent in June.
The standard deviation of the change in the exchange rate
The standard deviation of changes in the exchange rate, which represents the actual volatility of the exchange rate, rose to about 14 percent in June, compared with 12 percent in May. The implied volatility in OTC forex options––an indication of the expected exchange rate volatility––averaged about 13 percent in June, similar to its level in May, and above its level of 11 percent in April. For comparison, the implied volatility of forex options of the emerging markets in June was 17 percent, and of the advanced economies, 16 percent.
 




 
Forex transactions with domestic banks, by instruments and derivatives
($ million)
    Conversions (1) Swapsa (2) Optionsb (3) Total volume of trade (1)+(2)+(3)
Jun-09 Total 37,792 50,812 9,956 98,560
Daily average (22-days) 1,718 2,310 453 4,480
Nonresidents 12,205 41,499 4,121 57,825
of which Foreign financial institutions 11,870 41,347 4,004 57,221
Residents 25,587 9,313 5,835 40,735
of which Business sector 11,437 5,486 2,723 19,646
Institutions (incl. insurance companies) 1,261 716 8 1,985
Individuals and provident funds 1,291 130 399 1,820
Otherc 4,936 284 381 5,601
Domestic banksd 6,662 2,697 2,324 11,683
 
May-09 Total 33,327 39,246 8,316 80,889
Daily average (19-days) 1,754 2,066 438 4,257
Nonresidents 10,963 29,520 3,599 44,082
of which Foreign financial institutions 10,573 29,108 3,446 43,127
Residents 22,364 9,726 4,717 36,807
of which Business sector 9,728 5,386 2,311 17,425
Institutions (incl. insurance companies) 1,000 406 3 1,409
Individuals and provident funds 1,222 119 396 1,737
Otherc 3,928 144 308 4,380
Domestic banksd 6,486 3,671 1,699 11,856
 
a Only one leg of the swap, i.e., the nominal value of the transaction (in accordance with the BIS definition).
b The notional value, that includes purchases and sales of put and call options.
c Including the Bank of Israel and other entities such as portfolio managers, nonprofit organizations, national institutions, and those not included elsewhere.
d Total interbank trade, divided by 22