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Graphs and Data
1. The Exchange Rate
The shekel strengthened against the dollar, in parallel with the dollar's weakness against major currencies.
The shekel strengthened by about 1.8 percent against the dollar, and by about 1.7 percent against the euro during June. 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 percent.
In June, the dollar strengthened against most global currencies but weakened against the major currencies—by about 0.9 percent against the Swiss franc, by about 0.1 percent against the euro, and by about 0.4 percent against the pound sterling.
2. Exchange Rate Volatility
Actual volatility declined and implied volatility of the exchange rate increased.
The standard deviation of changes in the shekel-dollar exchange rate, which represents its actual volatility, declined in June by about 0.8 percentage points to 7.6 percent, compared with 8.3 percent in May.
The average level of implied volatility in over the counter shekel-dollar options––an indication of expected exchange rate volatility––increased to 10 percent at the end of June, compared with 8.5 percent in May.
In June, the implied volatility in foreign exchange options increased in both emerging and advanced economies—to 11.4 percent in emerging markets and 10.3 percent in advanced economies, compared with 8.7 percent in emerging markets and 8.9 percent in advanced economies in May.
3. The Volume of Trade in the Foreign Currency Market
Average daily trading volume declined, primarily as a result of a sharp decline of about 39 percent in options trading.
The total volume of trade in foreign currency in June was about $85 billion, compared with about $93 billion in May. Average daily trading volume declined by about 4 percent in June, and reached about $4.2 billion.
The volume of trade in spot and forward transactions (conversions) was about $36 billion in June, compared with $39 billion in May. The average daily trading volume in those transactions declined in June by about 5 percent compared with May. During June, the Bank of Israel bought $1.44 billion through conversion transactions[1], of which $240 million were purchased within the framework 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 $8.8 billion in June. The average daily trading volume in those options in June was $438 million, an decline of about 36 percent from its level in May.
The trading volume of swap transactions was about $39 billion in June. Average daily turnover increased by around 7 percent, primarily in nonresidents’ transactions.
Nonresidents' share of total trade (spot and forward transactions, options and swaps) increased by 1 percentage point in June to 40.5 percent. There was an increase in June in nonresidents’ share of swap transactions (an increase of 3 percentage points).