Israel's foreign currency market in September 2010

Israel’s foreign currency market in September 2010
Developments in the exchange rate––the shekel appreciated against the dollar as the dollar weakened around
the world
The shekel appreciated by about 4 percent against the dollar in September, and depreciated by 2.9 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, strengthened by 0.4 percent.
The dollar's weakening against the shekel in September was in line with its performance against the major currencies: it weakened by 6.6 percent against the euro, by 2.6 percent against the pound sterling, and by 4.2 percent against the Swiss franc.
Since the beginning of 2010 the shekel appreciated by 2.9 percent against the dollar, and by 8.4 percent against the euro.
In terms of the nominal effective exchange rate the shekel appreciated by 3.6 percent.
The volatility of the exchange rate––exchange rate volatility was relatively low
The standard deviation of changes in the exchange rate, which represents its actual volatility, in September, 3.6 percent, compared with 5.6 percent in August and 6.2 percent in July.
The average level of the implied volatility in OTC (over the counter) forex options––an indication of expected exchange rate volatility––was about 6.4 percent in September, compared with an average of 7.0 percent in August and 7.1 percent in July.
For comparison, the implied volatility of the foreign exchange options of emerging markets was 11.8 percent in September, and of advanced economies, about 12.0 percent.
The volume of trade in Israel’s forex market in September––the volume of spots and forward transactions was high in a short trading month
The total volume of trade in foreign currency in September, which was a short trading month of only sixteen trading days
because of the Jewish High Holidays, was about $86 billion, compared with $106 billion in August 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 $27 billion, a daily average of $1.7 billion, compared with a daily average of $1.35 billion in August. Nonresidents' transactions in spots and forwards totaled some $9.7 billion in September, accounting for 35 percent of the trade in these instruments. The Bank of Israel purchased $949[1] million in September.
The volume of trade in OTC foreign currency options (which are not traded on the stock exchange) totaled about $9 billion in September, and the volume of swap transactions was about $49 billion, compared with about $65 billion in August and about $59 billion in July.
Nonresidents' share in the total volume of trade (spots and forward transactions, options and swaps) in September was 63 percent, compared with 67 percent in August and 63 percent in July.

Forex transactions with domestic banks, by instruments and derivatives ($ million)
    Conversions (1) Swapsa (2) Optionsb (3) Total volume of trade (1)+(2)+(3)
September-10 (Not final) Total 27,273 49,478 9,180 85,931
Daily average (16-days) 1,705 3,092 574 ​5,371
Nonresidents 9,689 39,045 5,262 53,996
of which Foreign financial institutions 9,320 38,770 5,235 53,325
Residents 17,584 10,433 3,918 31,935
of which Real sector 8,133 1,070 1,329 10,532
Financial sector 2,731 3,458 1,003 7,192
Institutions (incl. insurance companies) 1,407 1,358 130 2,895
Individuals and provident funds 459 252 272 983
The Bank of Israel 949     949
Otherc 411 57 64 532
Domestic banksd 3,494 4,238 1,120 8,852
August -10 Total 29,698 65,008 11,272 105,978
  Daily average (22-days) 1,350 2,955 512 4,817
  Nonresidents 11,135 53,068 6,834 71,037
  of which Foreign financial institutions 10,763 52,528 6,358 69,649
  Residents 18,563 11,940 4,438 34,941
  of which Real sector 8,436 952 1,332 10,720
  Financial sector 3,196 3,951 1,468 8,615
  Institutions (incl. insurance companies) 1,362 2,362 33 3,757
  Individuals and provident funds 512 31 251 794
  The Bank of Israel 449     449
  Otherc 485 97 80 662
  Domestic banksd 4,123 4,547 1,274 9,944
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
[1] This figure is different from what was reported in the latest press release on the foreign exchange reserves. The difference results from foreign exchange purchases totaling $250 million by the Bank of Israel in the last days of September, the value dates of which were in October.