Israel's foreign currency market in June 2011

                                                                                                                                                                  10.07.2011
 
Israel’s foreign currency market in June 2011
 
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Developments in the exchange rate––the shekel appreciated against the dollar in line with the weakening of
the dollar world wide
The shekel appreciated by about 0.6 percent against the dollar during June, and appreciated by 0.14 percent against the
euro. In June, the dollar weakened against most currencies, including 0.4 percent against the euro.
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 appreciated by about 0.5 percent.
The volatility of the exchange rate––the actual and the implied volatility of the exchange rate increased in June
The standard deviation of changes in the exchange rate, which represents its actual volatility, rose slightly in June to about
 12.8 percent, compared with 12.3 percent in May.
The average level of the implied volatility in over the counter shekel-dollar options––an indication of expected exchange
rate volatility––also rose, and averaged about 12 percent in June, compared with an average of 10 percent in May. For comparison, the implied volatility of the foreign exchange options in both emerging and developed markets rose slightly,
 as the figure averaged 11 percent in June in emerging markets, and 13 percent in developed markets.
The volume of trade in the foreign currency market––an increase in the total volume of trade, and an increase
 in the trading volume in swap transactions
The total volume of trade in foreign currency rose in June to about $129 billion, compared with $113 billion in May and
111 billion in April. Average daily turnover increased to $6.2 billion, compared with $5.6 billion in May and $6.5 billion in April.
The volume of trade in spot and forward transactions was $41 billion in June, compared with $43 billion in May and about
 $33 billion in April. With that, the average daily trading volume in those transactions fell by about 9 percent in June,
compared with May, and reached $1.9 billion. In June, the Bank of Israel bought about $320 million[1] through these
transactions.
The volume of trade in over the counter foreign currency options (which are not traded on the stock exchange) totaled about $13 billion in June, compared with about $12 billion in May. The average daily trading volume in those options rose
 about 6 percent compared with May, to $625 million.
Trading volume of swap transactions rose 28 percent to about $75 billion in June, compared with $58 billion in May.
Average daily turnover increased 23 percent to about $3.5 billion.
Nonresidents' share of total trade (spot and forward transactions, options and swaps) was nearly unchanged in June,
at 50 percent of total trade, compared with 51 percent in May, and 50 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)
June-11 (Not final Total 40,979 75,193 13,131 129,303
Daily average (21 days) 1,951 3,581 625​ 6,157
Nonresidents 15,902 41,923 6,977 64,802
of which Foreign financial institutions 15,090 41,541 6,867 63,498
Residents 25,077 33,270 6,154 64,501
of which Real sector 9,812 3,022 2,338 15,172
Financial sector 6,077 15,417 1,134 22,628
Institutions (incl. insurance companies) 1,473 3,978 2 5,453
Individuals and provident funds 657 367 359 1,383
The Bank of Israel 320     320
Otherc 448 138 32 618
Domestic banksd 6,290 10,348 2,289 18,927
           
May- 11 Total 42,744 58,422 11,790 112,956
Daily average (20-days) 2,137 2,921 590 5,648
Nonresidents 15,406 36,878 5,840 58,124
of which Foreign financial institutions 15,069 36,780 5,733 57,582
Residents 27,338 21,544 5,950 54,832
of which Real sector 10,111 2,631 2,859 15,601
Financial sector 5,900 8,159 1,041 15,100
Institutions (incl. insurance companies) 3,485 1,727 0 5,212
Individuals and provident funds 858 416 299 1,573
The Bank of Israel 305     305
Otherc 742 36 84 862
Domestic banksd 5,937 8,575 1,667 16,179
 
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 about $105 million by the Bank of Israel in the last days of May, the value dates of which were in June.
 
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