Israel's foreign currency market in September 2011

09.10.2011
 
Israel’s foreign currency market in September 2011
 
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Developments in the exchange rate––the shekel depreciated against the dollar in line with significant dollar strength around the world
The shekel depreciated by about 4.3 percent against the dollar during September, and appreciated by 1.9 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
 0.03 percent.
In September, the dollar strengthened against most major currencies, including by 6.3 percent against the euro, 4.4 percent against the British pound, and 11.4 percent against the Swiss franc.
The volatility of the shekel exchange rate––the actual and the implied volatility of the exchange rate decreased
 in September
The standard deviation of changes in the shekel exchange rate, which represents its actual volatility, decreased in
September to about 9.7 percent, compared with 11.2 percent in August.
The average level of the implied volatility in over the counter shekel-dollar options––an indication of expected exchange rate volatility––averaged about 12.4 percent in September, similar to its level in August. For comparison, the implied volatility of foreign exchange options in both emerging markets and advanced economies increased by 2 percentage points, to 15.5
percent and 14 percent, respectively.
The volume of trade in the foreign currency market––a decrease in total trading volume, along with a decline in nonresidents' share of total trading volume
The total volume of trade in foreign currency in September was about $132 billion, compared with $136 billion in
August and $117 billion in July. Average daily turnover increased in the past two months and was $7 billion, compared
with $6.2 billion in August and $5.6 billion in July.
The volume of trade in spot and forward transactions (conversions) was $46.1 billion in September, compared
with $49.2 billion in August. The average daily trading volume in those transactions increased by about 8 percent in
September, compared with the average in August, and reached $2.4 billion.
The volume of trade in over the counter foreign currency options (which are not traded on the stock exchange) totaled about $11.1 billion in September, compared with about $12.5 billion in August. The average daily trading volume in those
options rose by about 3 percent compared with the August level, to $586 million.
Trading volume of swap transactions increased to about $75 billion in September, from $73.8 billion in August. Average
 daily turnover increased by 18 percent to about $3.9 billion.
 
Nonresidents' share of total trade (spot and forward transactions, options and swaps) continued to decline, reaching 41 percent in September, compared with 43 percent in August, 47 percent in July, and 50 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)​
September-11 (Not final) Total 46,102 75,024 11,129 132,255
Daily average (22 days) 2,426 3,949 586 6,961
Nonresidents 15,804 33,568 5,460 54,832
of which Foreign financial institutions 14,906 32,822 5,240 52,968
Residents 30,298 41,456 5,669 77,423
of which Real sector 9,798 4,079 2,415 16,292
Financial sector 7,995 23,082 1,413 32,490
Institutions (incl. insurance companies) 2,724 3,779 0 6,503
Individuals and provident funds 810 381 508 1,699
The Bank of Israel 0     0
Otherc 498 10 72 580
Domestic banksd 8,473 10,125 1,261 19,859
           
August -'11 Total 49,260 73,822 12,468 135,550
Daily average (22 days) 2,239 3,356 567 6,161
Nonresidents 16,055 36,044 5,513 57,612
of which Foreign financial institutions 15,507 34,701 4,839 55,047
Residents 33,205 37,778 6,955 77,938
of which Real sector 11,153 2,589 3,385 17,127
Financial sector 7,329 18,278 719 26,326
Institutions (incl. insurance companies) 4,213 2,226 150 6,589
Individuals and provident funds 1,036 874 413 2,323
The Bank of Israel 0     0
Otherc 624 16 170 810
Domestic banksd 8,850 13,795 2,118 24,763
 
  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