Graphs & Data
1. The Exchange Rate
Weakening of the shekel against the dollar, alongside strengthening of the dollar worldwide.
In May, the shekel weakened by about 2.4 percent against the dollar and by about 0.5 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 weakened by about 0.9 percent in May.
Worldwide, the dollar strengthened against major currencies in May: the dollar strengthened by 1.8 percent against the euro, by 2.4 percent against the Swiss franc, and by 2.6 percent against the Japanese yen; in contrast, the dollar weakened by 0.3 percent against the British pound.
2. Exchange Rate Volatility
An increase in actual volatility of the exchange rate, in contrast with a decline in implied volatility.
The standard deviation of changes in the shekel-dollar exchange rate, which represents its actual volatility, increased by about 1.2 percentage points in May, to 6.5 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 by about 0.5 percentage points, to 7.9 percent at the end of May.
The implied volatility in foreign exchange options in emerging markets increased slightly, to an average of about 10.9 percent in May, compared with 10.8 percent in April. In contrast, the implied volatility in foreign exchange options in advanced economies declined to about 11.1 percent at the end of May, compared with 11.6 percent in April (Figure 4).
3. The Volume of Trade in the Foreign Currency Market
Average daily trading volume increased, in parallel with a decline in nonresidents’ relative share of total trading volume.
Total trading volume in foreign currency in May was about $151 billion, compared with about $136 billion in April. Average daily trading volume increased by about 6 percent, to about $7.6 billion.
The volume of trade in spot and forward transactions (conversions) was about $34 billion in May. Average daily trading volume in those transactions increased in May by about 6 percent compared with April.
The volume of trade in over the counter foreign currency options (which are not traded on the stock exchange) totaled about $5.2 billion in May. The average daily trading volume in those options declined by about 17 percent in May compared with April, to about $260 million.
The trading volume of swap transactions was about $112 billion in May, compared with $100 billion in April. Average daily trading volume increased by about 7 percent from the previous month, to around $5.6 billion.
Nonresidents’ share of total trade (spot and forward transactions, options and swaps) declined by about 6 percentage points, to about 27.5 percent at the end of May. The decline was a result of decreased volume of activity by nonresidents in swap and options transactions.
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