Israel's foreign currency market in June 2012

Israel’s foreign currency market in June 2012
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1. The Exchange Rate
The shekel weakened against the dollar, as the dollar weakened against global currencies
The shekel depreciated by about 1.08 percent against the dollar during June, and weakened by about 2.3 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 weakened by about 1.87 percent.
In June, the dollar weakened against most currencies in the world, weakening by 1.3 percent against the euro, by 1.2 percent against the Swiss franc, and by about 0.9 percent against the pound sterling, while it strengthened by 1.1 percent against the Japanese yen.
2. Exchange Rate Volatility
Actual and implied volatility of the exchange rate increased
The standard deviation of changes in the shekel-dollar exchange rate, which represents its actual volatility, increased in June to 6.8 percent, compared with 5.4 percent in May.
The average level of the implied volatility in over the counter shekel-dollar options––an indication of expected exchange rate volatility––increased in June to 8.8 percent, compared with 8.4 percent in May.
For comparison, the implied volatility of foreign exchange options in emerging markets in June was 13.8 percent, up from 11.4 percent in May, and that in advanced economies was 11.3 percent, up from 9.9 percent in May.
3. The Volume of Trade in the Foreign Currency Market
There was a decline in average daily volume, while there was an increase in nonresidents' share of trading volume
The total volume of trade in foreign currency in June was about $115.3 billion, compared with $131.2 billion in May. Average daily trading volume declined by about 3.7 percent in June, and reached about $5.5 billion.
The volume of trade in spot and forward transactions (conversions) was about $36.6 billion in June, compared with $36.3 billion in May. The average daily trading volume in those transactions increased in June by about 10 percent, compared with May, to $1.74 billion.
The volume of trade in over the counter foreign currency options (which are not traded on the stock exchange) totaled about $9.7 billion in June, compared with $13.4 billion in May. The average daily trading volume in those options in June was $462 million, a decrease of 21 percent from May.
The trading volume of swap transactions was about $68.9 billion in June, compared with $81.4 billion in May. Average daily turnover declined by about 7 percent to about $3.3 billion.
Nonresidents' share of total trade (spot and forward transactions, options and swaps) increased in June to 44.3 percent, compared with 39.1 percent in May and 46.6 percent in April. The increase derived primarily from a decline in June of 24 percent in the average daily turnover by Israelis in such transactions.

Forex transactions with domestic banks, by instruments and derivatives ($ million)
    Conversions (1) Swapsa (2) Optionsb (3) Total volume of trade (1)+(2)+(3)
June-12 (Not final) Total 36,628 68,918 9,704 115,250
Daily average (21 days) 1,744 3,282 462 5,488
Nonresidents 13,849 32,224 5,008 51,081
of which Foreign financial institutions 13,206 31,362 4,910 49,478
Residents 22,779 36,694 4,696 64,169
of which Real sector 5,830 2,268 2,109 10,207
Financial sector 4,776 21,686 625 27,087
Institutions (incl. insurance companies) 2,921 3,362 21 6,304
Individuals and provident funds 550 502 440 1,492
The Bank of Israel 0     0
Otherc 2,823 27 66 2,916
Domestic banksd 5,879 8,849 1,435 16,163
May - 12 Total 36,346 81,399 13,403 131,148
Daily average (23-days) 1,580 3,539 583 5,702
Nonresidents 13,336 32,881 5,056 51,273
of which Foreign financial institutions 12,475 31,881 4,880 49,236
Residents 23,010 48,518 8,347 79,875
of which Real sector 6,888 2,143 3,126 12,157
Financial sector 4,927 28,950 2,094 35,971
Institutions (incl. insurance companies) 2,181 5,159 590 7,930
Individuals and provident funds 590 131 394 1,115
The Bank of Israel 0     0
Otherc 3,283 19 94 3,396
Domestic banksd 5,141 12,116 2,049 19,306
  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