Israel’s foreign currency market in November 2012
1. The Exchange Rate
The shekel strengthened against the dollar, as the dollar traded mixed against currencies worldwide
The shekel appreciated by about 1.8 percent against the dollar and by a similar rate against the euro during November. 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 1.9 percent.
In November, the dollar traded mixed against world currencies, weakening by 0.3 percent against the Swiss franc, while strengthening by 3.6 percent against the Japanese yen. The dollar remained essentially unchanged against the euro.
2. Exchange Rate Volatility
Actual volatility of the exchange rate increased, in parallel with an increase in implied volatility
The standard deviation of changes in the shekel-dollar exchange rate, which represents its actual volatility, increased in November to 8.1 percent, compared with 6.3 percent in October.
The average level of the implied volatility in over the counter shekel-dollar options––an indication of expected exchange rate volatility––increased in November to about 9.9 percent, compared with about 9.2 percent in October.
In contrast, the implied volatility of foreign exchange options declined in emerging markets in November to 8.4 percent on average, compared with 9.5 percent in October, and in advanced economies to 7 percent, from 7.7 percent in October.
3. The Volume of Trade in the Foreign Currency Market
There was a decline in average daily trading volume, and a decline in nonresidents' share of trading volume
The total volume of trade in foreign currency in November was about $92 billion, compared with $97 billion in October. Average daily trading volume decreased by about 10 percent in November, and reached about $4.2 billion.
The volume of trade in spot and forward transactions (conversions) was about $38 billion in November, compared with $35 billion in October. The average daily trading volume in those transactions increased by about 1.4 percent in November compared with October, to $1.7 billion.
The volume of trade in over the counter foreign currency options (which are not traded on the stock exchange) totaled about $10.1 billion in November, compared with $9.8 billion in October. The average daily trading volume in those options in November was $460 million, a decrease of 1.6 percent from October.
The trading volume of swap transactions was about $44 billion in November, compared with $51 billion in October. Continuing the trend of the past year, average daily turnover of swap transactions continued to decline, to about $2 billion, compared with $2.4 billion in October.
Nonresidents' share of total trade (spot and forward transactions, options and swaps) decreased in November to about 45 percent, compared with about 49 percent in October. The decline derived primarily from a contraction in volume of nonresidents' swap transactions.
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 2
e As of the October 09 press release, trading volume data is identical to the monthly data published on the website.
For more information, see: http://www.boi.org.il/en/DataAndStatistics/Pages/MainPage.aspx?Level=3&Sid=31&SubjectType=2
Likewise, as of the same month, broader sectorial data on Israeli residents is presented.