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Graphs & Data
1. The Exchange Rate
The shekel strengthened against the dollar, as the dollar weakened against global currencies.
In March, the shekel strengthened by 0.3 percent against the dollar, and weakened by about 0.2 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 0.1 percent.
In March, the dollar weakened against most global currencies—including by about 0.3 percent against the Swiss franc and by about 0.6 percent against the euro, while it strengthened by about 0.5 percent against the British pound, and by about 1.5 percent against the Japanese yen.
2. Exchange Rate Volatility
Actual volatility of the exchange rate declined, in contrast with an increase in its implied volatility.
The standard deviation of changes in the shekel-dollar exchange rate, which represents its actual volatility, declined in March by about 0.4 percentage points to 4.4 percent, compared with 4.8 percent in February.
The average level of implied volatility in over the counter shekel-dollar options––an indication of expected exchange rate volatility––increased to 8 percent at the end of March, compared with 7.1 percent in February.
In contrast, in March, the implied volatility in foreign exchange options in emerging markets declined, reaching 9.5 percent on average, compared with 10.1 percent in February. The implied volatility in foreign exchange options in advanced economies declined as well in March to 7.6 percent at the end of the month, compared with 8 percent at the end of February.
3. The Volume of Trade in the Foreign Currency Market
Average daily trading volume increased, in parallel with an increase in nonresidents’ share of total trading volume
The total volume of trade in foreign currency in March was about $104 billion, compared with about $91.2 billion in February. Average daily trading volume increased by about 14 percent in March, and reached about $5.2 billion.
The volume of trade in spot and forward transactions (conversions) was about $32 billion in March, compared with about $33 billion in February. The average daily trading volume in those transactions declined in March by about 4 percent compared with February. During March, the Bank of Israel bought $645 million through conversion transactions[1], including $245 million as part of the purchase program intended to offset the effect of natural gas production on the exchange rate.
The volume of trade in over the counter foreign currency options (which are not traded on the stock exchange) totaled about $9 billion in March. The average daily trading volume in those options in March was about $430 million, a decline of about 7 percent from its level in February.
The trading volume of swap transactions was about $64 billion in March. Average daily turnover increased from the previous month, to around $3.2 billion.
Nonresidents' share of total trade (spot and forward transactions, options and swaps) increased in March, to about 39 percent.
[1] This figure reflects transactions by trade date, not settlement date. Therefore, it is not necessarily identical to the data published in the foreign exchange reserves notice, which reflects transactions by settlement date.
Forex transactions with domestic banks, by instruments and sectors
($ million)
Conversions (1) |
Swaps[1] (2) |
Cross Currency swap[2] (3) |
Options[3] (4) |
Total volume of trade (1)+(2)+(3)+(4) | ||
March
2014
(Not final) |
Total |
31,905 |
63,844 |
38 |
8,699 |
104,486 |
Daily average (20 days) |
1,595 |
3,192 |
2 |
435 |
5,224 | |
Nonresidents |
12,680 |
23,759 |
0 |
4,555 |
40,994 | |
of which Foreign financial institutions |
11,919 |
23,640 |
0 |
4,489 |
40,048 | |
Residents |
19,225 |
40,085 |
38 |
4,144 |
63,492 | |
of which Real sector |
5,958 |
3,227 |
0 |
1,997 |
11,182 | |
Financial sector |
4,058 |
25,509 |
0 |
690 |
30,257 | |
Institutions (incl. insurance companies) |
1,864 |
5,345 |
38 |
464 |
7,711 | |
Individuals and provident funds |
799 |
458 |
0 |
232 |
1,489 | |
The Bank of Israel |
645 |
0 |
0 |
0 |
645 | |
of which within the program to offset the gas effect |
245 |
0 |
0 |
0 |
245 | |
Other[4] |
3,106 |
42 |
0 |
54 |
3,202 | |
Domestic banks[5] |
2,795 |
5,504 |
0 |
707 |
9,006 | |
February
2014 |
Total |
33,072 |
48,052 |
848 |
9,323 |
91,295 |
Daily average (20 days) |
1,654 |
2,403 |
42 |
466 |
4,565 | |
Nonresidents |
11,068 |
13,729 |
0 |
3,767 |
28,564 | |
of which Foreign financial institutions |
10,380 |
13,658 |
0 |
3,616 |
27,654 | |
Residents |
22,004 |
34,323 |
848 |
5,556 |
62,731 | |
of which Real sector |
6,044 |
3,776 |
600 |
2,504 |
12,924 | |
Financial sector |
3,228 |
17,215 |
14 |
1,706 |
22,163 | |
Institutions (incl. insurance companies) |
5,141 |
5,173 |
105 |
75 |
10,494 | |
Individuals and provident funds |
852 |
286 |
0 |
335 |
1,473 | |
The Bank of Israel |
490 |
0 |
0 |
0 |
490 | |
of which within the program to offset the gas effect |
290 |
0 |
0 |
0 |
290 | |
Other4 |
3,125 |
41 |
0 |
169 |
3,335 | |
Domestic banks5 |
3,124 |
7,832 |
129 |
767 |
11,852 |
[1] Only one leg of the swap, i.e., the nominal value of the transaction (in accordance with the BIS definition)
[2] The exchanged founds through Cross Currency Swap transactions considered for the volume, as one leg only in cases where the two legs offset each other.
[4] Including other entities such as portfolio managers, nonprofit organizations, national institutions, and those not include elsewhere.