Israel's foreign currency market in August 2011

                                                                                                                                                                  08.09.2011
 
Israel’s foreign currency market in August 2011
 
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Developments in the exchange rate––the dollar appreciated against the shekel and against most other
currencies, but weakened against the euro and Japanese yen
The shekel depreciated by about 3.7 percent against the dollar during August, and depreciated by 5 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 3.7
 percent.
In August, the dollar weakened against the euro and Japanese yen by 1.3 percent, but strengthened against most other currencies, including 0.7 percent against the Swiss franc.
The volatility of the shekel exchange rate––the actual and the implied volatility of the exchange rate increased
in August
The standard deviation of changes in the shekel exchange rate, which represents its actual volatility, increased in August
to about 11.2 percent, compared with 9.1 percent in July.
The average level of the implied volatility in over the counter shekel-dollar options––an indication of expected exchange rate volatility––also increased, and averaged about 12.4 percent in August, compared with an average of 11.2 percent in July.
For comparison, the implied volatility of foreign exchange options in both emerging markets and advanced economies also
 rose, to 13.1 percent and 14.9 percent, respectively.
The volume of trade in the foreign currency market––an increase in trading volume in swap transactions and in
 spot and forward transactions, along with a decline in nonresidents' share of total trade volume
The total volume of trade in foreign currency in August was about $134 billion, compared with $117 billion in July and
 $129 billion in June. Average daily turnover was $6 billion, compared with $5.6 billion in July and $6.2 billion in June.
The volume of trade in spot and forward transactions (conversions) was $48 billion in August, compared with $38
billion in July. The average daily trading volume in those transactions increased by about 23 percent in August, compared
with the average in July, and reached $2.2 billion.
The volume of trade in over the counter foreign currency options (which are not traded on the stock exchange) totaled about $11.3 billion in August, compared with about $13.8 billion in July. The average daily trading volume in those options
fell by about 21 percent compared with the July level, to $515 million.
Trading volume of swap transactions increased by 13 percent to about $74 billion in August, from $65 billion in July.
Average daily turnover increased by 8 percent to about $3.4 billion.
Nonresidents' share of total trade (spot and forward transactions, options and swaps) contracted by about 4 percentage points in August, to 43 percent of total trade.
 




 
Forex transactions with domestic banks, by instruments and derivatives ($ million)
    Conversions ​(1) Swapsa (2) Optionsb (3) Total volume of trade (1)+(2)+(3)
August-11 (Not final) Total 48,449 73,809 11,338 133,596
Daily average (22 days) 2,202 3,355 515 6,073
Nonresidents 15,951 36,044 4,974 56,969
of which Foreign financial institutions 15,406 34,701 4,299 54,406
Residents 32,497 37,765 6,365 76,627
of which Real sector 10,786 2,583 3,031 16,400
Financial sector 7,329 18,276 696 26,302
Institutions (incl. insurance companies) 4,152 2,226 150 6,528
Individuals and provident funds 959 871 424 2,254
The Bank of Israel 0     0
Otherc 612 16 163 791
Domestic banksd 8,659 13,792 1,900 24,351
           
July- '11 Total 37,529 65,492 13,756 116,777
Daily average (21-days) 1,787 3,119 655 5,561
Nonresidents 12,963 34,483 7,258 54,705
of which Foreign financial institutions 12,562 33,236 6,855 52,654
Residents 24,566 31,009 6,498 62,072
of which Real sector 8,729 1,710 3,162 13,601
Financial sector 5,196 14,218 1,049 20,464
Institutions (incl. insurance companies) 2,797 3,135 100 6,032
Individuals and provident funds 870 584 251 1,705
The Bank of Israel 225     225
Otherc 498 47 53 598
Domestic banksd 6,250 11,314 1,883 19,447
 
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