Israel's foreign currency market in March 2012

                                                                                                                                                                   08.04.2012
 
Israel’s foreign currency market in March 2012
 
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1. The Exchange Rate
The shekel strengthened against the dollar, while the dollar strengthened around the world
The shekel appreciated by about 1.35 percent against the dollar during March, and appreciated by about 2.16 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 strengthened by
about 2.16 percent.
In March, the dollar strengthened against most major currencies in the world, strengthening 0.8 percent against the euro
and by 2.2 percent against the Japanese yen, while weakening 0.3 percent against the pound sterling.
2. Exchange Rate Volatility
Actual volatility and implied volatility of the exchange rate decreased
The standard deviation of changes in the shekel-dollar exchange rate, which represents its actual volatility, decreased in
March to 5.5 percent, compared with 8.4 percent in February.
The average level of the implied volatility in over the counter shekel-dollar options––an indication of expected exchange rate volatility––declined in March, to 9.6 percent, compared with 10.3 percent in February.
For comparison, the implied volatility of foreign exchange options in emerging markets in March was 11.9 percent, down
from 12.7 percent in February, and that in advanced economies was 10 percent, down from 10.4 percent in February.
3. The Volume of Trade in the Foreign Currency Market
There was a decline in overall volume, along with a decline in nonresidents' share of trading volume
The total volume of trade in foreign currency in March was about $104.7 billion, compared with $113.4 billion in
February. Average daily turnover declined about 3 percent in March, and reached about $5.2 billion.
The volume of trade in spot and forward transactions (conversions) was about $34.8 billion in March, compared with $35.6 billion in February. The average daily trading volume in those transactions increased in March by about 2 percent, to
$1.75 billion.
The volume of trade in over the counter foreign currency options (which are not traded on the stock exchange) totaled about $10.2 billion in March, compared with $12.4 billion in February. The average daily trading volume in those options in
March was $511 million, a decline of 13 percent from February.
The trading volume of swap transactions was about $59.7 billion in March, compared with $65.4 billion in February.
Average daily turnover declined about 4 percent to about $2.9 billion.
Nonresidents' share of total trade (spot and forward transactions, options and swaps) declined in March to 42 percent, compared with 44.1 percent in February and 37.5 percent in January. The decline was primarily in nonresidents' share of
swap transactions, mainly as a result of a decline in the volume of average daily activity by nonresidents and a moderate
increase in the average daily activity by Israelis in those transactions.
 





 
Forex transactions with domestic banks, by instruments and derivatives ($ million)
    Conversions (1) Swapsa (2) Optionsb (3) Total volume of trade (1)+(2)+(3)
April-11 (Not final) Total 34,809 59,662 10,211 104,682
Daily average (20 days) 1,658 2,841 486 4,985
Nonresidents 13,628 24,675 5,605 43,908
of which Foreign financial institutions 12,965 24,456 5,575 42,996
Residents 21,181 34,987 4,606 60,774
of which Real sector 5,898 1,887 1,234 9,019
Financial sector 4,304 21,372 1,067 26,743
Institutions (incl. insurance companies) 2,148 2,944 0 5,092
Individuals and provident funds 492 429 203 1,124
The Bank of Israel 0     0
Otherc 3,041 1 40 3,082​
Domestic banksd 5,298 8,354 2,062 15,714
           
B1מרץ-11 Total 35,609 65,440 12,357 113,406
Daily average (21-days) 1,696 3,116 588 5,400
Nonresidents 13,679 30,009 6,359 50,047
of which Foreign financial institutions 12,819 27,408 6,239 46,466
Residents 21,930 35,431 5,998 63,359
of which Real sector 5,517 2,063 2,712 10,292
Financial sector 4,087 19,601 1,369 25,057
Institutions (incl. insurance companies) 3,334 3,748 0 7,082
Individuals and provident funds 524 196 262 982
The Bank of Israel 0     0
Otherc 2,890 24 71 2,985
Domestic banksd 5,578 9,799 1,584 16,961
 
  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