Israel's foreign currency market in November 2009

9.12.2009
 
Israel’s foreign currency market in November 2009
 
In November 2009 the shekel depreciated against the dollar by about 1.2 percent; this was in contrast with the major currencies, which appreciated against the dollar. In terms of the nominal effective exchange rate the shekel depreciated by 2 percent.
Total trade in foreign currency in November amounted to some $91 billion, compared with $88 billion in October, and an average of $86 billion a month since the beginning of 2009. Of the total, currency conversions totaled about $34 billion in November, compared with about $31 billion in October.
In November the volatility of the actual shekel exchange rate increased to about 9.5 percent, compared with a level of 6–7 percent in September–October. Expected volatility, reflected by the implied volatility of shekel/dollar options, remained in November at the average October level of about 9.5 percent.
   
Exchange rate developments
In November 2009 the shekel depreciated against the dollar by about 1.2 percent, in contrast with the major currencies, which appreciated against the dollar. The shekel depreciated by 2.7 percent against the euro, and the nominal effective exchange rate of the shekel, calculated as the change in the exchange rate of the shekel against the weighted currencies of Israel's main trading partners, showed shekel depreciation of 2.0 percent.
Since the beginning of 2009 the shekel has appreciated by about 0.3 percent against the dollar, and has depreciated by about 7.6 percent against the euro and by about 5.0 percent in terms of the nominal effective exchange rate.
   
The volume of trade in Israel's forex market
Total trade in foreign currency in November amounted to $91 billion, compared with $88 billion in October, and an average of $86 billion a month since the beginning of 2009. Of this, currency conversions totaled about $34 billion in November, compared with an average of $37 billion a month since the beginning of the year. The activity of the foreign financial institutions accounted for some $13 billion (compared with $11 billion in October), and the domestic real sector about $8 billion (similar to the amount in October). The Bank of Israel's did not purchase foreign currency in November.
OTC options (not traded in the stock exchange) totaled about $13 billion in November, compared with $11 billion in October. About half of this activity (some $5 billion) was activity of the foreign institutional investors. The volume of swap transactions totaled about $45 billion in November, compared with $46 billion in October, and an average of $38 billion a month since the beginning of 2009.
Nonresidents' share of total turnover (conversions, options and swaps) in November was about 58 percent, compared with 57 percent in October.
   
The volatility of the exchange rate
The standard deviation of changes in the exchange rate, which represents actual exchange rate volatility, increased to about 9.5 percent in November from 6 percent in October, and 7 percent in September.
The implied volatility in OTC forex options––an indication of expected exchange rate volatility––averaged about 9.5 percent in November, similar to its level in October and compared with 11 percent in September. For comparison, the implied volatility of forex options of the emerging markets in November averaged 14 percent, and of the advanced economies, 13.9 percent.
 




 
    Conversions (1) Swapsa (2) Optionsb (3) Total volume of trade (1)+(2)+(3)
November-09 (Not final) Total 33,706 45,127 12,669 91,502
Daily average (21-days) 1,605 2,149 603 4,357
Nonresidents 13,711 34,739 4,978 53,383
of which Foreign financial institutions 13,406 34,619 4,965 52,945
Residents 19,995 10,388 7,691 38,061
of which Real sector 8,227 936 2,444 11,587
Financial sector 4,561 3,495 2,600 10,635
Institutions (incl. insurance companies) 1,194 760   1,953
Individuals and provident funds 893 527 619 2,061
The Bank of Israel 0     0
Otherc 288 117 72 477
Domestic banksd 4,832 4,553 1,956 11,348
           
October-09 Total 31,476 45,678 10,635 87,789
Daily average (22-days) 1,431 2,076 483 3,990
Nonresidents 11,513 34,353 3,961 49,684
of which Foreign financial institutions 11,405 34,249 3,852 49,365
Residents 19,963 11,325 6,674 37,961
of which Real sector 8,176 1,325 2,594 12,095
Financial sector 3,141 3,418 1,711 8,270
Institutions (incl. insurance companies) 1,536 1,399   2,935
Individuals and provident funds 845 514 788 2,146
The Bank of Israel 1,274     1,274
Otherc 231 79 151 461
Domestic banksd 4,760 4,590 1,430 10,780
 
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 other entities such as portfolio managers, nonprofit organizations, national institutions, and those not included elsewhere.
d Total interbank trade, divided by 2