1. The Exchange Rate
Weakening of the shekel against
the dollar and euro, and weakening of the dollar worldwide.
In July, the shekel weakened by 1.8
percent against the dollar, and by 4.7 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 3.1 percent in July.
Worldwide, the US dollar weakened
against most major currencies in July. The dollar weakened by 2.8 percent
against the euro, by 1.0 percent against the British pound, and by 1.2 percent
against the Japanese yen. In contrast, the dollar strengthened by 1.1 percent
against the Swiss franc.
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 3.1 percentage points in July, to 7.5 percent at the end of
The average level of implied
volatility in over the counter shekel-dollar options increased by about 0.7
percentage points, to 7.6 percent at the end of July.
In parallel, the implied volatility in
foreign exchange options in emerging markets increased, to an average of about
8.8 percent, and the implied volatility in foreign exchange options in advanced
economies also increased, to about 7.7 percent at the end of July (Figure 4).
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 declined,
with an increase in nonresidents’ relative share of total trading volume.
Total trading volume in foreign
currency in July was about $154 billion, compared with about $157 billion
in June. Average daily trading volume increased by about 3 percent, to about $7.3
The trading volume in spot and
forward transactions (conversions) was about $36 billion in July. Average
daily trading volume in those transactions increased in July by about 30
percent compared with June.
The trading volume in over the
counter foreign currency options (which are not traded on the stock
exchange) totaled about $9.1 billion in July. The average daily trading volume
in those options increased compared with June, to about $434 million.
The trading volume in swap
transactions totaled about $107 billion, compared with about $120 billion
in June. Average daily trading volume in swap transactions declined by about 7
percent compared with the previous month, to around $5.1 billion.
Nonresidents’ share of total trade
(spot and forward transactions, options and swaps) increased to about 38.6 percent
at the end of July. The increase was a result of higher volume of activity by
nonresidents in conversion and options transactions.