Israel's foreign currency market in August 2010

                                                                                                                                                                     07.09.2010
 
Israel’s foreign currency market in August 2010
 
Developments in the exchange rate––the shekel weakened against the dollar and strengthened against the
euro
The shekel depreciated by about 1 percent against the dollar in August, and appreciated by 1.6 percent against the euro.
Against the currencies of Israel's main trading partners, the nominal effective exchange rate of the shekel, i.e., the trade-
weighted average shekel exchange rate against those currencies, remained at about the same level as at the end of July.
Since the beginning of 2010 the shekel depreciated by 1.1 percent against the dollar, and appreciated by 10.9 percent
against the euro. In terms of the nominal effective exchange rate the shekel appreciated by 3.2 percent.
The dollar showed mixed trends in the international markets in August: it weakened by 1.7 percent against the Swiss franc
and by 2.2 percent against the Japanese yen, while strengthening by 2.5 percent against the euro and by 1.4 percent
against the pound sterling.
The volatility of the exchange rate––exchange rate volatility decreased
The standard deviation of changes in the exchange rate, which represents its actual volatility, was about 5.6 percent in
August, compared with 6.2 percent in July and 7.8 percent in June.
The average level of the implied volatility in OTC (over the counter) forex options––an indication of expected exchange rate volatility––was about 7.0 percent in August, compared with an average of 7.1 percent in July and 8.4 percent in June. For comparison, the implied volatility of the foreign exchange options of emerging markets was 12.3 percent in August, and of advanced economies, about 12.0 percent.
The volume of trade in Israel’s forex market in August––the volume of spots and forward transactions was
slightly above that in July
The total volume of trade in foreign currency in August was about $106 billion, compared with $97 billion in July and an
average monthly level of $101 billion in the first six months of 2010. The volume of trade in spot and forward transactions
totaled about $30 billion, compared with about $28 billion in July. Nonresidents' transactions in spots and forwards totaled
some $11 billion in August, accounting for 37 percent of the trade in these instruments, a similar share to that in July. The
Bank of Israel purchased $449 million on the market in August.
The volume of trade in OTC foreign currency options (which are not traded on the stock exchange) totaled about $11 billion in August, and the volume of swap transactions was about $65 billion, compared with about $59 billion in July and about $57 billion in June.
Nonresidents' share in the total volume of trade (spot and forward transactions, options and swaps) in August was 67
percent, compared with 63 percent in July and 62 percent in June.
 




 
Forex transactions with domestic banks, by instruments and derivatives ($ million)
    Conversions (1) Swapsa (2) Optionsb (3) Total volume of trade (1)+(2)+(3)
August-10 (Not final Total 29,654 65,007 11,252 105,913
Daily average (22-days) 1,348 2,955 511 4,814
Nonresidents 11,107 53,068 6,824 70,999
of which Foreign financial institutions 10,741 52,528 6,348 69,617
Residents 18,547 11,939 4,428 34,914
of which Real sector 8,476 953 2,201 11,630
Financial sector 3,143 3,951 ​590 7,684
Institutions (incl. insurance companies) 1,362 2,362 33 3,757
Individuals and provident funds 504 29 255 788
The Bank of Israel 449     449
Otherc 485 97 75 657
Domestic banksd 4,128 4,547 1,274 9,949
           
July- 10 Total 28,397 58,806 9,938 97,141
Daily average (19-days) 1,352 2,800 473 4,626
Nonresidents 10,413 47,244 3,963 61,620
of which Foreign financial institutions 10,147 46,825 3,645 60,617
Residents 17,984 11,562 5,975 35,521
of which Real sector 8,077 1,447 2,240 11,764
Financial sector 3,638 3,304 1,683 8,625
Institutions (incl. insurance companies) 1,365 1,964 51 3,380
Individuals and provident funds 505 59 204 768
The Bank of Israel 147     147
Otherc 348 145 76 569
Domestic banksd 3,904 4,643 1,721 10,268
 
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
 
​​