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1. The Exchange Rate
The shekel weakened against the dollar, in parallel with the dollar's strength against global currencies
The shekel weakened by about 2.5 percent against the dollar during May, while weakening by about 2.2 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 1.4 percent.

In May, the dollar strengthened against global currencies—by about 1.8 percent against the Swiss franc, by about 0.3 percent against the euro, and by about 2 percent against the pound sterling.

2. Exchange Rate Volatility
Actual volatility increased sharply and implied volatility of the exchange rate increased moderately
The standard deviation of changes in the shekel-dollar exchange rate, which represents its actual volatility, increased sharply in May by about 4 percentage points to 8.3 percent, compared with 4 percent in April.
The average level of implied volatility in over the counter shekel-dollar options––an indication of expected exchange rate volatility––increased slightly to 8.5 percent at the end of May, compared with 8.3 percent in April.

In May, the implied volatility in foreign exchange options increased in both emerging and advanced economies—to 8.7 percent in emerging markets and 8.9 percent in advanced economies, compared with 8.5 percent in emerging markets and 8.2 percent in advanced economies in April.

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 34 percent in nonresidents' share of trading volume in foreign currency swaps. This decline was partly offset by an increase in conversion transaction volume.
The total volume of trade in foreign currency in May was about $93 billion, compared with about $92 billion in April. Average daily trading volume declined by about 4 percent in May, and reached about $4.4 billion.
The volume of trade in spot and forward transactions (conversions) was about $39 billion in May, compared with $31 billion in April. The average daily trading volume in those transactions increased in May by about 19 percent compared with April. During May, the Bank of Israel bought $520 million through conversion transactions[1], of which $230 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 $14.4 billion in May. The average daily trading volume in those options in May was $686 million, an increase of about 32 percent from its level in April.
The trading volume of swap transactions was about $38 billion in May. Average daily turnover declined by around 27 percent, primarily in nonresidents’ transactions.
Nonresidents' share of total trade (spot and forward transactions, options and swaps) declined by 4 percentage points in May to 40 percent. There was a sharp decline in May in nonresidents’ share of swap transactions (a decline of 5 percentage points), while in contrast their share in conversion transactions increased by about 1 percentage points.

[1] This figure reflects transactions by trade date, not settlement date. Therefore, it is not identical to the data published in the foreign exchange reserves notice. The difference derives from foreign currency purchases of about $430 million which traded in the last two days of April but for which the settlement date was in May.