Israel's foreign currency market in July 2009

4.8.2009
 
Israel’s foreign currency market in July 2009
 
  The shekel appreciated against the dollar by about 3.3 percent in July 2009, and against the euro by about 3.4 percent.
  Currency conversions totaled about $37 billion in July, similar to the average monthly amount since the beginning of the year.
  The shekel exchange rate became less volatile in July than in previous months; expected volatility, reflected by the implied volatility of shekel/dollar options, was lower that in the previous month.
Exchange rate developments
In July 2009 the shekel appreciated against the dollar by about 3.3 percent, and against the euro by about 3.4 percent. The nominal effective exchange rate of the shekel, which shows the change in the exchange rate of the shekel against the currencies of Israel's main trading partners, showed shekel appreciation of 2.9 percent. The background to the appreciation of the shekel in July was the worldwide weakening of the dollar against most major currencies.
Since the beginning of 2009 the shekel appreciated against the dollar by about 0.3 percent, it depreciated against the euro by about 0.9 percent, and in terms of the nominal effective exchange rate it depreciated by about 1.5 percent.
The volume of trade in Israel's forex market
The volume of foreign currency conversions totaled about $37 billion in July 2009, slightly lower than the $38 billion in June, and slightly above the average monthly amount of $36 billion since the beginning of the year. Over-the-counter (OTC) options (not traded in the stock exchange) totaled about $11 billion, compared with $10 billion in June.
The volume of swap transactions continued at a higher level than that in the first few months of the year, and totaled about $52 billion (compared with $51 billion in June). As usual, most of this consisted of transactions by foreign financial institutions, which totaled about $42 billion.
Nonresidents' share of total turnover (conversions, options and swaps) rose from 59 percent in June to about 61 percent in July.
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, declined to about 10 percent in July, compared with 14 percent in June, and compared with a monthly average of about 12 percent since the beginning of the year. The implied volatility in OTC forex options––an indication of the expected exchange rate volatility––averaged about 12 percent in July, down from 13 percent in June. For comparison, the implied volatility of forex options of the emerging markets in July was 15 percent, and of the advanced economies, 14 percent.
 




 
Forex transactions with domestic banks, by instruments and derivatives
($ million)
    Conversions (1) Swapsa (2) Optionsb (3) Total volume of trade (1)+(2)+(3)
jul - 09 (Not final) Total 37,217 52,347 10,670 100,234
Daily average (22-days) 1,692 2,379 485 4,556
Nonresidents 14,303 42,409 4,049 60,761
of which Foreign financial institutions 14,028 42,259 4,012 60,299
Residents 22,914 9,938 6,621 39,473
of which Business sector 9,691 5,468 2,777 17,936
Institutions (incl. insurance companies) 659 777 319 1,755
Individuals and provident funds 1,041 114 643 1,798
Otherc 5,185 359 395 5,939
Domestic banksd 6,338 3,220 2,487 12,045
 
june 2009 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
 
 
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