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| 10.01.2010 |
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| Israel’s foreign currency market in December 2009 |
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In December 2009 the dollar weakened by about 0.4 percent against the shekel; this was in contrast with its strengthening against most major currencies. In terms of the nominal effective exchange rate the shekel appreciated by 2.4 percent. |
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Total trade in foreign currency in December amounted to some $98 billion, higher than in November. The increase was due mainly to increased swap transactions. |
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In December the volatility of the actual shekel exchange rate declined to about 6 percent, compared with a level of 9.5 percent in November. Expected volatility, reflected by the implied volatility of shekel/dollar options, also dropped in December, by one percentage point, to about 8.5 percent. |
| Exchange rate developments |
| In December 2009 the dollar depreciated by about 0.4 percent against the shekel, in contrast with the its appreciation against most of the major currencies, such as its 7.6 percent appreciation against the yen and 4.7 percent appreciation against the euro. The shekel appreciated by about 4.5 percent against the euro, and the nominal effective exchange rate of the shekel, calculated as the change in the exchange rate of the shekel against the weighted currencies of Israel's main trading partners, showed shekel appreciation of about 2.4 percent. |
| In 2009 the shekel appreciated by about 0.7 percent against the dollar, and depreciated by about 2.7 percent against the euro and by about 2.5 percent in terms of the nominal effective exchange rate. |
| The volume of trade in Israel's forex market |
| Total trade in foreign currency in December amounted to $98 billion, compared with $92 billion in November, and an average of $87 billion a month since the beginning of 2009. Currency conversions totaled about $34 billion in December, similar to the amount in November; conversions by foreign financial institutions declined in December, while those of the domestic real sector increased. The Bank of Israel purchased about $130 million in December. |
| OTC foreign currency options (not traded in the stock exchange) totaled about $11 billion in December, compared with $13 billion in November. Most of this activity (some $7.5 billion) was by Israelis, mainly the Israeli banks (about $2.7 billion) in their role as market makers, and the real sector (about $2.5 billion). The volume of swap transactions totaled about $53 billion in December, compared with $45 billion in November, and an average of $40 billion a month since the beginning of 2009. |
| Nonresidents' share of total turnover (conversions, options and swaps) in November was about 55 percent, compared with an average of about 53 percent since the beginning of 2009. |
| The volatility of the exchange rate |
| The standard deviation of changes in the exchange rate, which represents actual exchange rate volatility, declined to about 6 percent in December from 9.5 percent in November. |
| The implied volatility in OTC shekel/dollar options––an indication of expected exchange rate volatility––declined from its level of 9.5 percent in September–November to 8.5 percent in December. For comparison, the implied volatility of forex options of the emerging markets in December averaged 14.2 percent, and of the advanced economies, 13.9 percent. |
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Forex transactions with domestic banks, by instruments and derivatives
($ million) |
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Conversions (1) |
Swapsa (2) |
Optionsb (3) |
Total volume of trade (1)+(2)+(3) |
| December-09 (Not final) |
Total |
33,971 |
53,486 |
10,809 |
98,266 |
| Daily average (22-days) |
1,544 |
2,431 |
491 |
4,467 |
| Nonresidents |
9,908 |
41,353 |
3,229 |
54,490 |
| of which Foreign financial institutions |
9,691 |
40,944 |
3,144 |
53,779 |
| Residents |
24,063 |
12,133 |
7,580 |
43,775 |
| of which Real sector |
9,520 |
1,694 |
2,551 |
13,766 |
| Financial sector |
5,520 |
3,812 |
1,603 |
10,935 |
| Institutions (incl. insurance companies) |
2,245 |
1,898 |
25 |
4,167 |
| Individuals and provident funds |
789 |
334 |
660 |
1,782 |
| The Bank of Israel |
132 |
0 |
0 |
132 |
| Otherc |
271 |
107 |
42 |
420 |
| Domestic banksd |
5,586 |
4,288 |
2,699 |
12,573 |
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| B1נובמבר-09 |
Total |
33,756 |
45,129 |
12,806 |
91,691 |
| Daily average (21-days) |
1,607 |
2,149 |
610 |
4,366 |
| Nonresidents |
13,758 |
34,739 |
4,978 |
53,475 |
| of which Foreign financial institutions |
13,452 |
34,619 |
4,965 |
53,036 |
| Residents |
19,998 |
10,390 |
7,828 |
38,215 |
| of which Real sector |
8,221 |
936 |
2,557 |
11,713 |
| Financial sector |
4,560 |
3,496 |
2,584 |
10,640 |
| Institutions (incl. insurance companies) |
1,193 |
760 |
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1,953 |
| Individuals and provident funds |
904 |
528 |
659 |
2,091 |
| The Bank of Israel |
0 |
0 |
0 |
0 |
| Otherc |
288 |
117 |
72 |
477 |
| Domestic banksd |
4,832 |
4,553 |
1,956 |
11,341 |
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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 the Bank of Israel and other entities such as portfolio managers, nonprofit organizations, national institutions, and those not included elsewhere. |
| d |
Total interbank trade, divided by 22 |
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