1. The Exchange Rate
Strengthening of the shekel
against the dollar, with a weakening of the dollar worldwide.
In March, the shekel strengthened by
about 0.7 percent against the dollar, and weakened by 0.1 percent against the
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 about 0.4 percent in March.
Worldwide, the US dollar weakened
against most major currencies in March. The dollar weakened by 0.7 percent
against the euro, by 0.3 percent against the Japanese yen, by 0.4 percent
against the Swiss franc, and by 0.1 percent against the British pound.
2. Exchange Rate Volatility
An increase in actual volatility
of the exchange rate in parallel with an increase in implied volatility.
The standard deviation of changes in
the shekel-dollar exchange rate, which represents its actual volatility,
increased by about 4.9 percentage points in March, to 8.8 percent at the end of
The average level of implied
volatility in over the counter shekel-dollar options increased by about 1
percentage point, to 8.1 percent at the end of March.
In contrast, the implied volatility in
foreign exchange options in emerging markets declined, to an average of about
10.2 percent, and the implied volatility in foreign exchange options in
advanced economies also declined, to about 8.8 percent at the end of March
The implied volatility in foreign
exchange options trading is an indication of expected exchange rate
3. The Volume of Trade in the
Foreign Currency Market
Total trading volume increased,
with an increase in nonresidents’ relative share of total trading volume.
Total trading volume in foreign
currency in March was about $179 billion, compared with about $146 billion
in February. Average daily trading volume increased by about 11 percent, to
about $8.1 billion.
The trading volume in spot and
forward transactions (conversions) was about $36 billion in March. Average
daily trading volume in those transactions was unchanged in March at about $1.6
The trading volume in over the
counter foreign currency options (which are not traded on the stock
exchange) totaled about $9.3 billion in March. The average daily trading volume
in those options increased by about 10 percent compared with February, to about
The trading volume of swap
transactions was about $134 billion in March, compared with about $106
billion in February. Average daily trading volume in swap transactions
increased by about 15 percent compared with the previous month, to around $6.1
Nonresidents’ share of total trade
(spot and forward transactions, options and swaps) increased to about 37.5 percent
at the end of March. The increase was a result of increased volume of
nonresidents’ activity in conversion, spot, forward and swap transactions.
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