Israel's foreign currency market in November 2011

11.12.2011
 
Israel’s foreign currency market in November 2011
 
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1. The Exchange Rate
The shekel depreciated against the dollar in line with the strengthening of the dollar around the world

The shekel depreciated by about 5.2 percent against the dollar during November, and remained basically unchanged

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 2.1 percent.

The dollar strengthened by 5.2 percent against the euro, by 2.7 percent against the pound sterling, and by about 6 percent against the Swiss franc.
2. Exchange Rate Volatility
The actual volatility of the exchange rate decreased in November, while the implied volatility increased
The standard deviation of changes in the shekel exchange rate, which represents its actual volatility, continued its downward trend in November, and reached 6.57 percent, compared with 9.4 percent in October, 9.7 percent in September, and 11.2 percent in August.

In contrast, the average level of the implied volatility in over the counter shekel-dollar options––an indication of expected exchange rate volatility––reversed its downward trend of the previous three months and increased in November to 12

percent, compared with 11.3 percent in October and 12.4 percent in September. For comparison, the implied volatility of

 foreign exchange options in emerging markets in November was 17 percent, and that in advanced economies was 13.8

 percent, similar to their levels in October.

3. The Volume of Trade in the Foreign Currency Market

The total average daily volume of trade declined in November, in line with the reduction in nonresidents' share

 of the total trade.

The total volume of trade in foreign currency in November was about $129 billion, compared with $118 billion in

 October and $132.5 billion in September. Average daily turnover continued to fall in November, and reached about $5.9

 billion, down from $6.6 billion in October and about $7 billion in September.

The volume of trade in spot and forward transactions (conversions) was about $41.3 billion in November, compared

 with $35.6 billion in October. The average daily trading volume in those transactions continued to decline, and reached $1.9 billion, down from $2 billion in October and $2.4 billion in September.

The volume of trade in over the counter foreign currency options (which are not traded on the stock exchange) totaled about $10.5 billion in November, compared with $8.6 billion in October. The average daily trading volume in those options

 was $477 million, almost unchanged from the October level.

The trading volume of swap transactions was about $77 billion in November, compared with $73.8 billion in October.

 Average daily turnover fell by about 14 percent to about $3.5 billion.

Nonresidents' share of total trade (spot and forward transactions, options and swaps) decreased in November, to 40.36 percent, compared with 43.37 percent in October and 41 percent in September.
 





 
Forex transactions with domestic banks, by instruments and derivatives ($ million)
    Conversions (1) Swapsa (2) Optionsb (3) Total volume of trade (1)+(2)+(3)
B1נובמבר-11 Total 41,277 77,214 10,499 128,990
(Not final) Daily average (22 days) 1,876 3,510 477 5,863
  Nonresidents 13,684 33,489 4,885 52,058
  of which Foreign financial institutions 12,858 33,466 4,831 51,155
  Residents 27,593 43,725 5,614 76,932
  of which Real sector 8,906 2,102 2,133 13,141
  Financial sector 7,254 24,113 773 32,140
  Institutions (incl. insurance companies) 2,951 2,429 842 6,222
  Individuals and provident funds 589 207 372 1,168
  The Bank of Israel 0     0
  Otherc 635 30 84 749
  Domestic banksd 7,258 14,844 1,410 23,512
           
B1אוקטובר-11 Total 35,614 73,776 8,630 118,020
Daily average (18-days) 1,979 4,099 479 6,557
Nonresidents 11,250 35,386 4,554 51,190
of which Foreign financial institutions 10,658 33,349 4,433 48,440
Residents 24,364 38,390 4,076 66,830
of which Real sector 8,264 2,038 1,840 12,142
Financial sector 6,847 21,224 591 28,662
Institutions (incl. insurance companies) 3,361 2,396 152 5,909
Individuals and provident funds 515 749 200 1,464
The Bank of Israel 0     0
Otherc 279 16 157 452
Domestic banksd 5,098 11,967 1,136 18,201
 
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