| 29.7.2008 |
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| Summary of Israel's Foreign Exchange Activity and Capital Flows in June 2008
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| The shekel depreciated against the dollar by 3.7 percent in June, and against the euro by 5.6 percent. Since the beginning of 2008 the shekel has appreciated by a total of 12.8 percent against the dollar, and by 6.6 percent against the euro. |
| The trend of the strengthening of the shekel ended in the first half of June, and till the end of the month the dollar remained stable at a rate of about NIS 3.35. Exchange rate risk, as measured by the standard deviation of over-the-counter (OTC) trade in foreign currency options, rose in June to an average of 13.1 percent ,compared with 12 percent in May, and it occurred in options of all terms. Exchange rate risk in the emerging markets rose slightly, from 11.2 percent in May to 11.4 percent in June. |
| Nonresidents bought a net $500 million of foreign currency in June, mainly via derivatives, which are generally used for short-term activity. Investment activity in long-term instruments remained steady, with direct investments of $400 million, and sales of $130 million of government bonds, continuing the trend that started at the beginning of the year, bringing these sales to a cumulative $1.1 billion. Sales of foreign currency by nonresidents since the beginning of the year totaled about $5.6 billion, compared with $3.9 billion in the first half of 2007. Direct investments in the first half of 2008, $4.3 billion, were lower than in the first half of 2007, $5 billion. Portfolio investment fell even more steeply, from $3.1 billion in the first half of 2007 to only $0.8 billion in the first half of 2008. |
| The non-bank private sector bought a net $6.6 billion of foreign currency since the beginning of 2008, but in June was in balance. In June the business sector sold some $860 million of foreign currency, and since the beginning of the year it has purchased a net $4.9 billion. Most (about $830 million) of the sales in June were of instruments sensitive to the interest rate, and were made via derivatives ($580 million). During the month the business sector withdrew about $400 million from its foreign currency deposits in Israel, and accumulated $110 million in foreign currency deposits abroad. |
| Since the beginning of 2008 the business sector has bought some $1.7 billion of foreign currency via derivatives, compared with sales of $2.2 billion in the first half of 2007. In the same period it repaid a net $430 million of foreign currency credit from banks in Israel, compared with credit of $120 million which it took in the first half of 2007. |
| Institutional investors maintained a relatively slow rate of investments abroad in June, about $200 million. In addition, the institutions accumulated some $300 million in foreign currency deposits in June, mainly in banks in Israel. |
| The rate of investment abroad by the institutional investors since the beginning of 2008, about $1.4 billion, is below that in the first half of 2007, $1.9 billion. |
| Households withdrew about $700 million from mutual funds specializing in foreign currency in the first six months of the year, mostly from foreign-equity funds. |
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| Main Indicators of Foreign Currency Activity and Capital Flowsa ($ million) |
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| 2006 |
2007 |
From 1 Jan. 2007 to 30 June. 2007 |
From 1 Jan. 2008 to 25 June. 2008 |
May 2008 |
June 2008b |
| 1. Nonresidents |
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| (+) Total sales of foreign currency |
20,311 |
9,387 |
3,876 |
5,637 |
937 |
-505 |
| Total direct and portfolio (shares and bonds) investmentc |
23,402 |
11,825 |
8,187 |
5,048 |
1,144 |
285 |
| Portfolio investment in Israeli securities (bonds and shares) (+) |
9,097 |
2,160 |
3,143 |
772 |
586 |
-135 |
| of which In portfolio shares on the TASE (+) |
1,388 |
2,090 |
1,443 |
629 |
49 |
-31 |
| In Israeli bonds on the TASE (+) |
2,231 |
-554 |
686 |
-1,065 |
-507 |
-130 |
| Israeli issues abroad (bonds and shares) |
9,057 |
-179 |
513 |
1,367 |
1,000 |
0 |
| Direct investment (+) |
14,305 |
9,665 |
5,045 |
4,276 |
558 |
421 |
| Purchases of local-currency assets via derivatives (+) |
1,171 |
-3,300 |
-3,430 |
-328 |
717 |
-715 |
| Non-banking private sector |
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| (+ ) Total sales of foreign currency |
-27,275 |
-19,139 |
-8,888 |
-6,625 |
-1,873 |
10 |
| Direct investments abroad (–) |
-14,930 |
-6,832 |
-3,973 |
-2,354 |
-107 |
-74 |
| Investments in portfolio bonds and shares (–) |
-6,106 |
-2,295 |
-2,701 |
82 |
-539 |
-342 |
| 2. Business sector |
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| Accumulation in foreign-currency deposits (–) |
-3,316 |
-5,696 |
-1,434 |
-1,379 |
-1,401 |
290 |
| Net foreign-currency bank credit taken from banks in Israel (+) |
-1,688 |
-547 |
125 |
-432 |
112 |
-38 |
| Forward forex purchases via derivatives (–) |
-2,557 |
2,359 |
2,183 |
-1,725 |
-462 |
576 |
| 3. Institutional investors (excl. mutual funds): investments in assets abroad (–) |
-3,078 |
-3,083 |
-1,923 |
-1,385 |
-274 |
-194 |
| 4. Households |
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| Accumulation (–) in mutual funds specializing in forex |
788 |
1,083 |
481 |
729 |
37 |
17 |
| Accumulation (–) in forex deposits in banks in Israel |
-1,669 |
-1,854 |
-497 |
-272 |
47 |
145 |
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| a |
The table provides an indication only, and does not necessarily incorporate all forex activity. |
| b |
The data for this month are on a liquidity month basis, i.e., beginning on the last Thursday of the previous month and ending on the last Wednesday of the current month. Hence, different periods cannot be combined from these data. |
| c |
Excluding government bond issues abroad. |
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