BANK OF ISRAELOffice of the Spokesperson and Economic Information

August 9, 2015Press Release

Israel’s foreign currency market in July 2015

1. The Exchange RateWeakening of the shekel against the dollar in parallel with strengthening of the dollar worldwide.

In July, the shekel weakened by about 0.4 percent against the dollar. The shekel strengthened by about 1.9 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 1.6 percent in July.In July, the dollar strengthened against most major currencies—by about 2.3 percent against the euro, by about 3.9 percent against the Swiss franc, by about 0.9 percent against the British pound and by about 1.5 percent against the Japanese yen.

2. Exchange Rate VolatilityA decline in actual volatility of the exchange rate, in parallel with a decline in the implied volatility of the exchange rate.

The standard deviation of changes in the shekel-dollar exchange rate, which represents its actual volatility, declined in July by about 2.5 percentage points, to 5.9 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 to 8.9 percent at the end of July.The implied volatility in foreign exchange options in emerging markets declined to 10.1 percent in July, and the implied volatility in foreign exchange options in advanced economies also declined, to about 9.8 percent at the end of the month (Figure 4).

3. The Volume of Trade in the Foreign Currency Market Average daily trading volume declined, in parallel with stability in nonresidents’ relative share of total trading volume.

The total volume of trade in foreign currency in July was about $127 billion, compared with about $132 billion in June. Average daily trading volume declined by about 8 percent, to about $5.5 billion.

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The volume of trade in spot and forward transactions (conversions) was about $38 billion in July. Average daily trading volume in those transactions declined in July by about 21 percent compared with June.

The volume of trade in over the counter foreign currency options (which are not traded on the stock exchange) totaled about $6 billion in July. The average daily trading volume in those options was about $260 million in July, a decline of about 26 percent from June.

The trading volume of swap transactions was about $83 billion in July, compared with $78 billion in June. Average daily trading volume increased by about 3 percent from the previous month, to around $3.6 billion.

Nonresidents' share of total trade (spot and forward transactions, options and swaps) declined in July, to about 34 percent.

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Conversions

(1) Swaps1

(2)

Cross Currency swap2 (3)

Options3

(4)

Total volume of trade

(1)+(2)+(3)+(4)

July2015

) Not final(

Total37,95083,506605,925127,441 Daily average (23 days)1,6503,63132585,541

Nonresidents12,34228,843602,21343,458 of which Foreign financial institutions11,25627,871602,00641,193

Residents25,60854,66303,71283,983 of which Real sector8,46515,36101,52325,349

Financial sector1,93110,408060312,942 Institutions (incl. insurance

companies)5,3318,105016313,599 Individuals and provident funds8381,79904163,053

Other45,47012,664060918,743 Domestic banks53,5736,326039810,297

June 2015

Total46,16577,7389177,670132,490 Daily average (22 days)2,0983,534423496,022

Nonresidents16,00527,1653862,59446,150 of which Foreign financial institutions14,37426,0913112,28643,062

Residents30,16050,5735315,07686,340 of which Real sector8,18615,37802,24725,811

Financial sector3,0247,5335014711,105 Institutions (incl. insurance

companies)5,75510,7100116,466 Individuals and provident funds1,24096404252,629

Other47,6438,80601,71818,167 Domestic banks54,3127,1823063812,162

Forex transactions with domestic banks, by instruments and sectors ($ million)

1 Only one leg of the swap, i.e., the nominal value of the transaction (in accordance with the BIS definition)2 The exchanged founds through Cross Currency Swap transactions considered for the volume, as one leg only in cases where

the two legs offset each other.3 The national value, that includes purchases and sales of put and call options.4 Including other entities such as portfolio managers, nonprofit organizations, national institutions, and those not include

elsewhere.5 Total interbank trade, divided in two.4

5

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