| 10.10.2010 |
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| Israel’s foreign currency market in September 2010 |
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Developments in the exchange rate––the shekel appreciated against the dollar as the dollar weakened around
the world |
| The shekel appreciated by about 4 percent against the dollar in September, and depreciated by 2.9 percent against the euro. Against the currencies of Israel's main trading partners, the nominal effective exchange rate of the shekel, i.e., the trade- weighted average shekel exchange rate against those currencies, strengthened by 0.4 percent. |
| The dollar's weakening against the shekel in September was in line with its performance against the major currencies: it weakened by 6.6 percent against the euro, by 2.6 percent against the pound sterling, and by 4.2 percent against the Swiss franc. |
Since the beginning of 2010 the shekel appreciated by 2.9 percent against the dollar, and by 8.4 percent against the euro.
In terms of the nominal effective exchange rate the shekel appreciated by 3.6 percent. |
| The volatility of the exchange rate––exchange rate volatility was relatively low |
| The standard deviation of changes in the exchange rate, which represents its actual volatility, in September, 3.6 percent, compared with 5.6 percent in August and 6.2 percent in July. |
The average level of the implied volatility in OTC (over the counter) forex options––an indication of expected exchange rate volatility––was about 6.4 percent in September, compared with an average of 7.0 percent in August and 7.1 percent in July.
For comparison, the implied volatility of the foreign exchange options of emerging markets was 11.8 percent in September, and of advanced economies, about 12.0 percent. |
| The volume of trade in Israel’s forex market in September––the volume of spots and forward transactions was high in a short trading month |
The total volume of trade in foreign currency in September, which was a short trading month of only sixteen trading days
because of the Jewish High Holidays, was about $86 billion, compared with $106 billion in August and an average monthly
level of $101 billion in the first six months of 2010. The volume of trade in spots and forward transactions totaled about $27 billion, a daily average of $1.7 billion, compared with a daily average of $1.35 billion in August. Nonresidents' transactions in spots and forwards totaled some $9.7 billion in September, accounting for 35 percent of the trade in these instruments. The Bank of Israel purchased $949[1] million in September. |
| The volume of trade in OTC foreign currency options (which are not traded on the stock exchange) totaled about $9 billion in September, and the volume of swap transactions was about $49 billion, compared with about $65 billion in August and about $59 billion in July. |
| Nonresidents' share in the total volume of trade (spots and forward transactions, options and swaps) in September was 63 percent, compared with 67 percent in August and 63 percent in July. |
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| Forex transactions with domestic banks, by instruments and derivatives ($ million) |
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Conversions (1) |
Swapsa (2) |
Optionsb (3) |
Total volume of trade (1)+(2)+(3) |
| September-10 (Not final) |
Total |
27,273 |
49,478 |
9,180 |
85,931 |
| Daily average (16-days) |
1,705 |
3,092 |
574 |
5,371 |
| Nonresidents |
9,689 |
39,045 |
5,262 |
53,996 |
| of which Foreign financial institutions |
9,320 |
38,770 |
5,235 |
53,325 |
| Residents |
17,584 |
10,433 |
3,918 |
31,935 |
| of which Real sector |
8,133 |
1,070 |
1,329 |
10,532 |
| Financial sector |
2,731 |
3,458 |
1,003 |
7,192 |
| Institutions (incl. insurance companies) |
1,407 |
1,358 |
130 |
2,895 |
| Individuals and provident funds |
459 |
252 |
272 |
983 |
| The Bank of Israel |
949 |
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949 |
| Otherc |
411 |
57 |
64 |
532 |
| Domestic banksd |
3,494 |
4,238 |
1,120 |
8,852 |
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| August -10 |
Total |
29,698 |
65,008 |
11,272 |
105,978 |
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Daily average (22-days) |
1,350 |
2,955 |
512 |
4,817 |
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Nonresidents |
11,135 |
53,068 |
6,834 |
71,037 |
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of which Foreign financial institutions |
10,763 |
52,528 |
6,358 |
69,649 |
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Residents |
18,563 |
11,940 |
4,438 |
34,941 |
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of which Real sector |
8,436 |
952 |
1,332 |
10,720 |
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Financial sector |
3,196 |
3,951 |
1,468 |
8,615 |
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Institutions (incl. insurance companies) |
1,362 |
2,362 |
33 |
3,757 |
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Individuals and provident funds |
512 |
31 |
251 |
794 |
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The Bank of Israel |
449 |
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449 |
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Otherc |
485 |
97 |
80 |
662 |
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Domestic banksd |
4,123 |
4,547 |
1,274 |
9,944 |
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| 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 22 |
| [1] This figure is different from what was reported in the latest press release on the foreign exchange reserves. The difference results from foreign exchange purchases totaling $250 million by the Bank of Israel in the last days of September, the value dates of which were in October. |
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