Israel's foreign currency market in April 2010

10.05.2010
 
Israel’s foreign currency market in April 2010
 
Developments in the exchange rate––the shekel strengthened against the euro in April, against the background of the weakening of the euro around the world
The shekel weakened against the dollar during April by about 0.1 percent, while against the euro, which weakened world wide in light of the financial crisis in Southern European countries, the shekel strengthened by 0.9 percent. The nominal effective exchange rate, which represents the change in the shekel against the currencies of Israel’s main trading partners, showed shekel depreciation of about 0.1 percent.
The volatility of the exchange rate––actual volatility increased while the downward trend of implied volatility of foreign exchange options continued
The standard deviation of changes in the exchange rate, which represents its actual volatility, was about 6 percent in April, compared with 5.2 percent in March and 5.5 percent in February.
The average level of the implied volatility in OTC forex options––an indication of expected exchange rate volatility—was 7 percent, compared with about 7.3 percent in March and 8 percent in February. For comparison, the implied volatilities of the foreign exchange options in emerging markets and in advanced economies were both about 11 percent.
The volume of trade in Israel’s forex market in April was similar to the average monthly volume in the first quarter of 2010
The total volume of trade in foreign currency in April was about $98 billion, similar to the average monthly level in the first quarter of 2010. The volume of trade in spots and forward transactions totaled about $32 billion, about $20 billion of which (63 percent) was transactions by Israelis. The Bank of Israel purchased about $2.6 billion during April.
The volume of trade in OTC foreign currency options (which are not traded on the stock exchange) totaled about $10 billion. Foreign financial institutions accounted for about $4.5 billion of this trade. The volume of trade in swap transactions in April was the same as in March, about $57 billion, compared with $51 billion in February.
The share of foreign residents in the total volume of trade (spots and forward transactions, options transactions and swap transactions) was 59 percent in April, compared with 61 percent in March, 63 percent in February.
 




 
Forex transactions with domestic banks, by instruments and derivatives
($ million)
    Conversions (1) Swapsa (2) Optionsb (3) Total volume of trade (1)+(2)+(3)
April-10 (Not final) Total 31,668 56,516 10,036 98,220
Daily average (19-days) 1,667 2,975 528 5,169
Nonresidents 11,777 40,875 4,810 57,462
of which Foreign financial institutions 11,661 40,497 4,539 56,697
Residents 19,891 15,641 5,226 40,758
of which Real sector 7,788 1,916 1,776 11,480
Financial sector 2,968 5,835 1,503 10,306
Institutions (incl. insurance companies) 1,905 1,901 1 3,807
Individuals and provident funds 360 135 336 831
The Bank of Israel 2,550     2,550
Otherc 266 68 69 403
Domestic banksd 4,054 5,786 1,541 11,381
 
B1מרץ-09 Total 32,832 56,657 12,341 101,830
Daily average (20-days) 1,642 2,833 617 5,092
Nonresidents 12,743 42,761 6,153 61,657
of which Foreign financial institutions 12,620 42,448 5,986 61,054
Residents 20,089 13,896 6,188 40,173
of which Real sector 8,860 1,599 2,667 13,126
Financial sector 3,465 5,237 1,090 9,792
Institutions (incl. insurance companies) 1,413 2,081 47 3,541
Individuals and provident funds 427 248 270 945
The Bank of Israel 500     500
Otherc 441 90 291 822
Domestic banksd 4,983 4,641 1,823 11,447
 
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