1. The Exchange Rate - Strengthening of the shekel against the dollar, in parallel with a weakening of the dollar worldwide.  

During the course of the second quarter, the shekel strengthened by approximately 1.8 percent against the dollar, and by 0.4 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 strengthened by about 1.6 percent.


Worldwide, there was a weakening trend of US dollar against most major currencies in the second quarter (Figure 2). The dollar weakened by approximately 1.4 percent against the euro, by 2.9 percent against the Japanese yen, and by 2.1 percent against the Swiss franc. In contrast, the dollar strengthened by 2.8 percent against the British pound.

2. Exchange Rate Volatility

Little change in actual volatility of the exchange rate, and a decline in implied volatility.

The standard deviation of changes in the shekel/dollar exchange rate, which represents its actual volatility, remained stable in the second quarter, and was 5.1 percent at the end of June.

The average level of implied volatility in over the counter shekel/dollar options declined by 0.1 percentage points in the second quarter, to 7.2 percent at the end of June.

The implied volatility in foreign exchange options in emerging markets declined in the second quarter to 9.2 percent, compared with 9.5 percent at the end of the previous quarter. The implied volatility in foreign exchange options in developed markets declined to 6.3 percent at the end of the second quarter, compared with 7.6 percent at the end of the previous quarter (Figure 4).

The implied volatility in foreign exchange options trading is an indication of expected exchange rate volatility.


3. The Activity of the Main Segments in the Foreign Exchange Market[1]

During the second quarter of 2019, there was significant moderation of net activity in all segments of the foreign exchange market, relative to the previous quarter. An estimate of the activity of the main segments indicates that during the course of the quarter, institutional investors (pension funds, provident funds, and insurance companies) sold $1.1 billion net. In contrast, the business sector purchased about $2.2 billion net, and the financial sector purchased about $0.4 billion net.

Since the beginning of the year, nonresidents sold foreign currency totaling $2.2 billion net, and institutional investors sold foreign currency totaling $4.9 billion net, while the business sector purchased a total of $7.8 billion net.

The Bank of Israel has not intervened significantly in foreign currency trading since January 2019.

[1] The main sectors presented do not make up the entire market—for additional information, see the section on “The database of foreign exchange market activity” in the Bank of Israel's "Statistical Bulletin" for 2018 (in Hebrew):