Israel's foreign currency market in July 2010

                                                                                                                                                                   08.08.2010
 
Israel’s foreign currency market in July 2010
 
Developments in the exchange rate––the shekel strengthened against the dollar as the dollar weakened world wide.
The shekel appreciated against the dollar by 2.5 percent in July, as the dollar weakened against most of the major
currencies––by 5.8 percent against the euro, 2.7 percent against the yen, and 3.8 percent against the pound sterling.
The shekel depreciated in July by 3.5 percent against the euro, by 0.6 percent in terms of the nominal effective exchange
rate, calculated as the trade-weighted average shekel exchange rate against the currencies of Israel's main trading partners.
Since the beginning of 2010 the shekel depreciated by 0.1 percent against the dollar, and appreciated by 9.5 percent
against the euro. In terms of the nominal effective exchange rate the shekel appreciated by 3.1 percent.
The volatility of the exchange rate––exchange rate volatility decreased, and so did the average implied volatility derived from foreign exchange options.
The standard deviation of changes in the exchange rate, which represents its actual volatility, was about 6.2 percent in July, compared with 7.8 percent in June and 11.3 percent in May.
The average level of the implied volatility in OTC (over the counter) forex options––an indication of expected exchange rate volatility––was about 7.1 percent in July, compared with an average of 8.4 percent in June and May. For comparison, the implied volatility of the foreign exchange options of emerging markets was 13.3 percent in July, and of advanced economies, about 12.5 percent.
The volume of trade in Israel’s forex market in July––the volume of spots and forward transactions, about $28 billion, was lower than that in previous two months.
The total volume of trade in foreign currency in July was about $97 billion, compared with $99 billion in June and an average monthly level of $101 billion in the first six months of 2010. The volume of trade in spots and forward transactions totaled about $28 billion, lower than the levels in June (about $33 billion) and May (about $40 billion). The Bank of Israel purchased $147 million of foreign currency in July.
The volume of trade in swap transactions in July was about $59 billion, compared with $57 billion in June, and the volume of trade in OTC foreign currency options (which are not traded on the stock exchange) totaled about $10 billion.
Foreign residents' share in the total volume of trade (spots and forward transactions, options and swaps) in July was 63
percent, similar to the 62 percent in June, and higher than the 57 percent in May and 58 percent in April.
 




 
Forex transactions with domestic banks, by instruments and derivatives ($ million)
    Conversions (1) Swapsa (2) Optionsb (3) Total volume of trade (1)+(2)+(3)
July-10 (Not final Total 28,310 58,704 9,808 96,822
Daily average (22-days) 1,348 2,795 467 4,611
Nonresidents 10,370 47,151 3,857 61,378
of which Foreign financial institutions 10,105 ​46,732 3,539 60,376
Residents 17,940 11,553 5,951 35,444
of which Real sector 7,932 1,445 1,652 11,029
Financial sector 3,768 3,302 2,254 9,324
Institutions (incl. insurance companies) 1,365 1,927 51 3,343
Individuals and provident funds 472 58 204 734
The Bank of Israel 147     147
Otherc 351 178 76 605
Domestic banksd 3,905 4,643 1,714 10,262
           
June-10' Total 32,901 56,670 9,459 99,030
Daily average (19-days) 1,496 2,576 430 4,501
Nonresidents 11,884 45,026 4,197 61,107
of which Foreign financial institutions 11,602 44,841 4,103 60,546
Residents 21,017 11,644 5,262 37,923
of which Real sector 9,343 1,554 2,221 13,118
Financial sector 4,702 5,121 1,109 10,932
Institutions (incl. insurance companies) 1,211 1,444 88 2,743
Individuals and provident funds 705 244 339 1,288
The Bank of Israel 0     0
Otherc 609 89 396 1,094
Domestic banksd 4,447 3,192 1,109 8,748
 
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 22
 
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