Israel’s foreign currency market in October 2012

 

1. The Exchange Rate
The shekel strengthened against the dollar, as the dollar traded mixed against currencies worldwide
 
The shekel appreciated by about 0.9 percent against the dollar and by about 0.5 percent against the euro during October. 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 strengthened by about 0.9 percent.
In October, the dollar traded mixed against most currencies in the world, weakening by 0.4 percent against the euro and by 0.5 percent against the Swiss franc, while strengthening by 0.7 percent against the pound sterling, and by 2.8 percent against the Japanese yen.
 
 
2. Exchange Rate Volatility
Actual volatility of the exchange rate declined, in parallel with a decline in implied volatility
 
The standard deviation of changes in the shekel-dollar exchange rate, which represents its actual volatility, declined in October to 6.3 percent, compared with 7.9 percent in September.
The average level of the implied volatility in over the counter shekel-dollar options––an indication of expected exchange rate volatility––decreased slightly in October to about 9.2 percent, compared with about 9.3 percent in September.
For comparison, the implied volatility of foreign exchange options in emerging markets in October was 9.5 percent on average, compared with 10.6 percent in September, and that in advanced economies was 7.7 percent, down from 8.2 percent in September.
 
 
 
 
 
3. The Volume of Trade in the Foreign Currency Market
There was a decline in average daily trading volume, with an increase in nonresidents' share of trading volume
 
The total volume of trade in foreign currency in October was about $96 billion, compared with $76 billion in September. Average daily trading volume decreased by about 3 percent in October, and reached about $4.6 billion.
 
The volume of trade in spot and forward transactions (conversions) was about $35 billion in October, compared with $28 billion in September. The average daily trading volume in those transactions declined by about 4 percent in October compared with September, to $1.7 billion.
 
The volume of trade in over the counter foreign currency options (which are not traded on the stock exchange) totaled about $10 billion in October, compared with $7 billion in September. The average daily trading volume in those options in October was $467 million, an increase of 9 percent from September.
 
The trading volume of swap transactions was about $51 billion in October, compared with $42 billion in September. Continuing the trend of the past few months, average daily turnover of swap transactions continued to decline, to about $2.4 billion, compared with $2.5 billion in September.
 
Nonresidents' share of total trade (spot and forward transactions, options and swaps) increased in October to about 49 percent, compared with about 45 percent in September and about 50 percent in August.

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Forex transactions with domestic banks, by instruments and sectors ($ million)
     Conversions (1)   Swapsa (2)  Optionsb (3) Total volume of trade (1)+(2)+(3)
  Total 35,321 51,064 9,803 96,188
   Daily average (21 days) 1,682 2,432 466.809524 4,580
  Nonresidents 13,655 28,140 5,263 47,058
   of which Foreign financial institutions 12,644 27,439 4,974 45,057
  Residents 21,666 22,924 4,540 49,130
   of which Real sector 6,494 2,622 1,854 10,970
Oct-12  Financial sector 4,398 11,911 591 16,900
(Not final)  Institutions (incl. insurance companies) 2,579 3,976 70 6,625
   Individuals and provident funds 559 536 412 1507
   The Bank of Israel 0     0
   Otherc 2,865 77 163 3,105
   Domestic banksd 4,771 3,802 1,450 10,023
           
Sep-12 Total 28,156 40,861 6,865 75,882
 Daily average (16 days) 1,760 2,554 429.0625 4,743
Nonresidents 10,388 20,729 3,200 34,317
 of which Foreign financial institutions 9,904 20,537 3,009 33,450
Residents 17,768 20,132 3,665 41,565
 of which Real sector 5,790 2,119 1,695 9,604
 Financial sector 3,630 9,057 527 13,214
 Institutions (incl. insurance companies) 1,399 3,834 1 5,234
 Individuals and provident funds 429 278 215 922
 The Bank of Israel 0     0
 Otherc 2,652 79 190 2,921
 Domestic banksd 3,868 4,765 1,037 9,670
           
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 2
e As of the September 09 press release, trading volume data is identical to the monthly data published on the website.  For more information: see here
Likewise, as of the same month, broader sectorial data on Israeli residents is presented.
 
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