1. The Exchange Rate
Weakening of the shekel against the euro and dollar, in parallel with a strengthening of the dollar worldwide.
In October, the shekel weakened by about 2.4 percent against the dollar and 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 0.9 percent in October.
Worldwide, the US dollar strengthened against most major currencies in October. The dollar strengthened by 2.2 percent against the euro, by 4 percent against the Japanese yen, by 2.2 percent against the Swiss franc, and by 6.6 percent against the British pound.
2. Exchange Rate Volatility
A decline in actual volatility of the exchange rate in parallel with a decline in implied volatility.
The standard deviation of changes in the shekel-dollar exchange rate, which represents its actual volatility, decreased by about 0.2 percentage points in October, to 4.2 percent at the end of the month.
The average level of implied volatility in over the counter shekel-dollar options––an indication of expected exchange rate volatility––declined by about 0.4 percentage points, to 7.2 percent at the end of October.
In parallel, the implied volatility in foreign exchange options in emerging markets also declined, to an average of about 10.7 percent, and the implied volatility in foreign exchange options in advanced economies also declined, to about 9.6 percent at the end of October (Figure 4).
3. The Volume of Trade in the Foreign Currency Market
Total trading volume declined, in parallel with an decline in nonresidents’ relative share of total trading volume.
Total trading volume in foreign currency in October was about $107 billion, compared with about $150 billion in September.[1] Average daily trading volume increased by about 4 percent, to about $7.1 billion.
The trading volume in spot and forward transactions (conversions) was about $24 billion in October. Average daily trading volume in those transactions increased in October by about 6 percent compared with September.
The trading volume in over the counter foreign currency options (which are not traded on the stock exchange) totaled about $3.3 billion in October. The average daily trading volume in those options increased compared with September, to about $220 million.
The trading volume of swap transactions was about $80 billion in October, compared with about $114 million in September. Average daily trading volume increased by about 2 percent from the previous month, to around $5.3 billion.
Nonresidents' share of total trade (spot and forward transactions, options and swaps) declined to about 31 percent at the end of October. The decline derived from a decline in the volume of activity by nonresidents in swap and conversion (spot and forward) transactions.
[1] It should be noted that due to the holidays in Octoer, trading hours were reduced relative to the previous month.