| 14.5.2008 |
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| Summary of Israel's Foreign Exchange Activity in April 2008 |
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| The shekel appreciated against the dollar by 3.5 percent during April to a rate of 3.43 NIS/USD, following the depreciation that started in mid-March. Exchange rate risk remained relatively high. There was moderate activity in the different sectors, and a sizeable surplus was maintained in long-term activity––including nonresidents’ investments about $1.1 billion in Israeli shares, and direct investments abroad in shares by Israelis of about $0.4 billion. Activity in the foreign exchange market in April took place against the background of some easing of the international financial crisis, expectations that the interest rate differential between the shekel and the dollar would widen, and the ongoing purchases of foreign currency by the Bank of Israel as part of its program to increase the foreign exchange reserves. |
| The trend of depreciation of the shekel––which had started with the Bank’s announcement of its plan to increase the level of the foreign exchange reserves––continued in the first week of April. In the second week of the month the shekel appreciated again, and in the middle of the month the exchange rate was at the same level as prior to the announcement. The shekel appreciated against the euro by 5.2 percent in April. Average exchange rate risk, as measured by the implied volatility of NIS/$ options, rose slightly in April, mainly for terms longer than three months, from 12.2 percent to 12.3 percent, its highest level ever. Towards the end of the month exchange rate risk started declining somewhat. Exchange rate risk in the emerging markets dipped slightly. |
| Nonresidents sold a net $0.3 billion of foreign currency in April. Most of the sales, $1.1 billion, were in activity considered as long term––direct investments and purchases of shares. On the other hand, they bought some $0.9 billion of foreign currency via derivatives, which are generally used for short-term activity. Nonresidents also sold local currency government bonds towards the end of the month. |
| The business sector bought about a net $0.1 billion in April, mainly via derivatives. The sector’s direct investments abroad totaled about $0.5 billion. At the same time it continued to realize its portfolio investments, unlike the institutional and household sectors, and took $0.3 billion of foreign currency credit directly from banks abroad. |
| Institutional investors slowed the rate of their investments abroad to about $0.3 billion. Their activity focused on foreign currency deposits, and investing in shares abroad. |
| Households’ purchased about $0.3 billion of foreign currency. This was the net result of rising deposits of foreign currency and purchases of shares and on the other hand, sales of foreign bonds. |
| The Bank of Israel purchased about $0.5 billion of foreign currency in April1 as part of its planned increase in the forex reserves. The Bank’s total forex purchases in March and April came to about $1.15 billion. |
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| Main Indicators of Activity in the NIS/Forex Market forex sales (+), forex purchases (-) $ million |
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2006 |
2007 |
From 1 Jan. 2008 to 30 April. 2008 |
March 2008a |
April 2008a |
| 1. Nonresidents |
| Total direct and portfolio (shares and bonds) investmentb |
23,021 |
11,568 |
4,227 |
779 |
854 |
| Portfolio investment in Israeli securities (bonds and shares) (+) |
8,329 |
1,297 |
1,764 |
519 |
263 |
| of which In portfolio shares on the TASE (+) |
-96 |
894 |
1,588 |
178 |
244 |
| In Israeli bonds on the TASE (+) |
2,231 |
-554 |
-433 |
230 |
-176 |
| Israeli issues abroad (bonds and shares) |
8,266 |
489 |
244 |
0 |
-73 |
| Direct investment (+) |
14,692 |
10,271 |
2,463 |
260 |
591 |
| Purchases of local-currency assets via derivatives (+) |
1,171 |
-3,299 |
27 |
-826 |
-921 |
| Non-banking Private sector |
| Direct investments abroad (-) |
-14,843 |
-6,848 |
-1,210 |
-208 |
-311 |
| Investments in portfolio bonds and shares (-) |
-8,457 |
-5,477 |
435 |
-119 |
0 |
| 2. Business sector |
| Accumulation in foreign-currency deposits (-) |
-3,005 |
-5,098 |
-201 |
263 |
256 |
| Net foreign-currency bank credit taken from banks in Israel (+) |
-1,688 |
-543 |
-503 |
-156 |
-105 |
| Forward forex purchases via derivatives (-) |
-2,557 |
2,261 |
-1,305 |
265 |
-284 |
| 3. Institutional investors (excl. mutual funds): investments in assets abroad (-) |
-3,105 |
-3,764 |
-496 |
-263 |
-113 |
| 4. Households |
| Accumulation (-) in mutual funds specializing in forex |
788 |
1,083 |
674 |
180 |
14 |
| Accumulation (-) in forex deposits in banks in Israel |
-1,699 |
-1,848 |
-537 |
138 |
-253 |
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| 1 |
The data for these months are on a liquidity month basis. The Bank of Israel purchased about 425 millions of foreign currency during the period 1/4/2008 to 30/4/2008. |
| a |
The data for these months 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. |
| b |
Excluding government bond issues abroad. |
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