Israel’s foreign currency market in October 2013

To view this press release as a Word document

Data & Graphs

 

1. The Exchange Rate
The shekel strengthened against the dollar, in parallel with the dollar's weakness against global currencies.

The shekel appreciated by about 0.5 percent against the dollar, and weakened by about 0.6 percent against the euro during October. 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 weakened by about 0.1 percent.
In October, the dollar weakened against most global currencies—including by about 0.2 percent against the Swiss franc and by about 1 percent against the euro, but strengthened by about 0.7 percent against the Japanese yen, and by about 0.5 percent against the British pound.

2. Exchange Rate Volatility
Actual volatility of the exchange rate decreased in parallel with its implied volatility.

The standard deviation of changes in the shekel-dollar exchange rate, which represents its actual volatility, declined sharply in October, by about 5.6 percentage points to 4 percent, compared with 9.6 percent in September.
The average level of implied volatility in over the counter shekel-dollar options––an indication of expected exchange rate volatility––declined to 8.6 percent at the end of October, compared with 9.9 percent in September.
In October, the implied volatility in foreign exchange options in emerging markets also declined, reaching 9.6 percent on average, compared with 10.9 percent in September.  The implied volatility in foreign exchange options in advanced economies declined to 8 percent in October, compared with 9 percent in September.

3. The Volume of Trade in the Foreign Currency Market
Average daily trading volume declined.

The total volume of trade in foreign currency
in October was about $90 billion, compared with about $69 billion in September. Average daily trading volume declined by about 16 percent in October, and reached about $3.9 billion.

The volume of trade in spot and forward transactions (conversions)
was about $32 billion in October, compared with $27 billion in September. The average daily trading volume in those transactions declined in October by about 23 percent compared with September. During October, the Bank of Israel bought $560 million through conversion transactions[1], of which $260 million were bought as part of the purchase program intended to offset the effect of natural gas production on the exchange rate.

The volume of trade in over the counter foreign currency options
(which are not traded on the stock exchange) totaled about $7.5 billion in October. The average daily trading volume in those options in October was $327 million, a decline of about 20 percent from its level in September.

The trading volume of swap transactions
was about $50 billion in October. Average daily turnover declined from the previous month, to around $2.2 billion.

Nonresidents' share of total trade
(spot and forward transactions, options and swaps) remained unchanged in October from the previous month, at about 40 percent.


[1] This figure reflects transactions by trade date, not settlement date. Therefore, it is not necessarily identical to the data published in the foreign exchange reserves notice, which reflects transactions by settlement date.

 
10112013-11.png


10112013-22.png


10112013-33.png

10112013-44.png


10112013-55.png

Forex transactions with domestic banks, by instruments and sectors ($ million)

 
 
 
 Conversions (1)
 Swaps1 (2)
 Cross Currency swap5 (3)
 Options2 (4)
Total volume of trade (1)+(2)+(3)+(4)
 
Oct-13
 (Not final)
Total
32,298
49,946
238
7,517
89,999
 
 Daily average (21 days)
1,404
2,172
10
327
3,913
 
Nonresidents
11,257
21,656
170
2,754
35,837
 
 of which Foreign financial institutions
10,493
21,614
170
2,657
34,934
 
Residents
21,041
28,290
68
4,763
54,162
 
 of which Real sector
6,078
4,122
58
1,909
12,167
 
 Financial sector
4,166
8,647
0
1,595
14,408
 
 Institutions (incl. insurance companies)
3,172
6,170
10
78
9,430
 
 Individuals and provident funds
691
406
0
254
1,351
 
 The Bank of Israel
560
0
0
0
560
 
of which: Within the program to offset the effect of natural gas production
260
0
0
0
260
 
 Other 3
3,230
39
0
139
3,408
 
 Domestic banks4
3,144
8,906
0
788
12,838
 
 
 
 
 
 
 
 
 
Sep-13
Total
27,305
36,216
45
6,168
69,734
 
 Daily average (20 days)
1,820
2,414
3
411
4,649
 
Nonresidents
8,995
15,520
25
3,562
28,102
 
 of which Foreign financial institutions
8,355
15,449
25
3,329
27,158
 
Residents
18,310
20,696
20
2,606
41,632
 
 of which Real sector
5,268
3,479
0
1,398
10,145
 
 Financial sector
3,834
6,470
0
262
10,566
 
 Institutions (incl. insurance companies)
1,322
3,990
20
37
5,369
 
 Individuals and provident funds
599
112
0
197
908
 
 The Bank of Israel
895
0
0
0
895
 
of which: Within the program to offset the effect of natural gas production
295
0
0
0
295
 
 Other 3
3,052
20
0
15
3,087
 
 Domestic banks4
3,340
6,625
0
697
10,662
1 Only one leg of the swap, i.e., the nominal value of the transaction (in accordance with the BIS definition).
 
2 The notional value, that includes purchases and sales of put and call options.
 
3 Including other entities such as portfolio managers, nonprofit organizations, national institutions, and those not included elsewhere.
 
4 Total interbank trade, divided by 2
 
5   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.