Israel's foreign currency market in July 2011

                                                                                                                                                                  08.08.2011
 
Israel’s foreign currency market in July 2011
 
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Developments in the exchange rate––the dollar appreciated against the shekel and the euro, but weakened
against most other currencies
The shekel depreciated by about 0.4 percent against the dollar during July, and appreciated by 1 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 depreciated by about 0.3 percent.
In July the dollar strengthened against the euro by 1.4 percent, but depreciated against most other currencies, including a
1.8 percent depreciation against the pound sterling.
The volatility of the shekel exchange rate––the actual and the implied volatility of the exchange rate decreased
 in July
The standard deviation of changes in the shekel exchange rate, which represents its actual volatility, decreased in July to
 about 9.1 percent, compared with 12.6 percent in June.
The average level of the implied volatility in over the counter shekel-dollar options––an indication of expected exchange rate volatility––also declined, and averaged about 11.2 percent in July, compared with an average of 12.9 percent in June. For comparison, the implied volatility of foreign exchange options in both emerging markets and advanced economies also fell,
 to 10.8 percent and 12.2 percent respectively.
The volume of trade in the foreign currency market––a decline in trading volume in swap transactions, and in nonresidents' share of total trade
The total volume of trade in foreign currency in July was about $116 billion, compared with $129 billion in June and
 $113 billion in May. Average daily turnover was $5.5 billion, compared with $6.2 billion in June and $5.6 billion in May.
The volume of trade in spot and forward transactions was $37 billion in July, compared with $41 billion in June and
 about $43 billion in May. The average daily trading volume in those transactions fell by about 9 percent in July compared
 with the average in June, and reached $1.8 billion. In July, the Bank of Israel bought about $225 million through these transactions.
The volume of trade in over the counter foreign currency options (which are not traded on the stock exchange)
totaled about $14 billion in July, compared with about $13.2 billion in June. The average daily trading volume in those
options increased by about 4 percent compared with the June level, to $654 million.
Trading volume of swap transactions fell by 13 percent to about $65 billion in July, from $75 billion in June. Average
daily turnover decreased to about $3.1 billion.
Nonresidents' share of total trade (spot and forward transactions, options and swaps) contracted by about 3 percentage points in July, to 47 percent of total trade, compared with 50 percent in June and 51 percent in May.
 




 
Forex transactions with domestic banks, by instruments and derivatives ($ million)
    Conversions (1) Swapsa (2) Optionsb (3) Total volume of trade (1)+(2)+(3)
July-11 (Not final) Total 37,479 65,164 13,729 116,372
Daily average (21 days) 1,785 3,103 654 5,542
Nonresidents 12,950 34,483 7,258 54,691
of which Foreign financial institutions 12,550 33,236 6,855 52,641
Residents 24,529 30,681 6,471 61,681
of which Real sector 8,740 1,771 3,144 13,655
Financial sector 5,251 14,396 1,049​ 20,696
Institutions (incl. insurance companies) 2,790 3,135 100 6,025
Individuals and provident funds 803 343 266 1,412
The Bank of Israel 225     225
Otherc 495 47 41 583
Domestic banksd 6,225 10,989 1,871 19,085
           
June- 11 Total 41,008 75,272 13,161 129,441
Daily average (21-days) 1,953 3,584 627 6,164
Nonresidents 15,922 41,942 6,977 64,841
of which Foreign financial institutions 15,095 41,560 6,867 63,522
Residents 25,086 33,330 6,184 64,600
of which Real sector 9,814 3,072 2,384 15,270
Financial sector 6,137 15,456 1,134 22,727
Institutions (incl. insurance companies) 1,473 3,978 2 5,453
Individuals and provident funds 659 367 343 1,369
The Bank of Israel 320     320
Otherc 392 99 32 523
Domestic banksd 6,291 10,358 2,289 18,938
 
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