Israel’s foreign currency market in June 2016

Graphs & Data

1. The Exchange Rate

Strengthening of the shekel against the dollar, alongside a mixed trend of the dollar worldwide.

In June, the shekel strengthened by about 0.1 percent against the dollar and by about 0.3 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 about 0.1 percent in June.
Worldwide, there was a mixed trend in the exchange rate of the US dollar in June.  The dollar strengthened by 0.2 percent against the euro and by 8.8 percent against the British pound; while it weakened by 7.4 percent against the Japanese yen and by 1.3 percent against the Swiss franc.
 

2. Exchange Rate Volatility

An increase in actual volatility of the exchange rate, in parallel with an increase in implied volatility.

The standard deviation of changes in the shekel-dollar exchange rate, which represents its actual volatility, increased by about 2.3 percentage points in June, to 8.8 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 by about 0.75 percentage points, to 8.8 percent at the end of June.
The implied volatility in foreign exchange options in emerging markets declined slightly, to an average of about 10.8 percent in June, compared with 10.9 percent in May. In contrast, the implied volatility in foreign exchange options in advanced economies increased to about 11.3 percent at the end of June, compared with 11.1 percent in May (Figure 4).
 
 

3. The Volume of Trade in the Foreign Currency Market

Total trading volume increased, in parallel with an increase in nonresidents’ relative share of total trading volume.

 
Total trading volume in foreign currency in June was about $164 billion, compared with about $151 billion in May. Average daily trading volume declined by about 1 percent, to about $7.5 billion.
 
The volume of trade in spot and forward transactions (conversions) was about $42 billion in June. Average daily trading volume in those transactions increased in June by about 12 percent compared with May.
 
The volume of trade in over the counter foreign currency options (which are not traded on the stock exchange) totaled about $7.4 billion in June. The average daily trading volume in those options increased by about 30 percent in June compared with May, to about $335 million.
 
The trading volume of swap transactions was about $112 billion in June, unchanged compared with May. Average daily trading volume declined by about 9 percent from the previous month, to around $5.1 billion.
 
Nonresidents' share of total trade (spot and forward transactions, options and swaps) increased by about 4 percentage points, to about 31.9 percent at the end of June.  The increase was a result of increased volume of activity by nonresidents in conversions and options transactions.