Israel’s foreign currency market in July 2013
1. The Exchange Rate
The shekel strengthened by about 1.4 percent against the dollar, while weakening by about 0.2 percent against the euro during July. 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 0.8 percent.
2. Exchange Rate Volatility
The standard deviation of changes in the shekel-dollar exchange rate, which represents its actual volatility, declined in July by about 0.3 percentage points to 7.3 percent, compared with 7.6 percent in June.
In July, the implied volatility in foreign exchange options declined in both emerging and advanced economies—to 11.1 percent in emerging markets and 10.0 percent in advanced economies, compared with 11.4 percent in emerging markets and 10.3 percent in advanced economies in June.
3. The Volume of Trade in the Foreign Currency Market
The total volume of trade in foreign currency in July was about $83.5 billion, compared with about $85 billion in June. Average daily trading volume declined by about 10.5 percent in July, and reached about $3.8 billion.
The volume of trade in spot and forward transactions (conversions) was about $33 billion in July, compared with $36 billion in June. The average daily trading volume in those transactions declined in July by about 15.5 percent compared with June. During July, the Bank of Israel bought $255 million through conversion transactions, as part of the purchase program intended to offset the effect on the exchange rate of natural gas production.
The volume of trade in over the counter foreign currency options (which are not traded on the stock exchange) totaled about $8.5 billion in July. The average daily trading volume in those options in July was $385 million, a decline of about 13 percent from its level in June.
The trading volume of swap transactions was about $46 billion in July. Average daily turnover declined by around 6 percent, as a result of a decline of about 23 percent in the volume of nonresidents’ transactions.
Nonresidents' share of total trade (spot and forward transactions, options and swaps) declined by about 7 percentage points in July to about 33.7 percent. There was a decline of about 10 percentage points in nonresidents’ share of swap transactions in July.