BANK OF ISRAELOffice of the Spokesperson and Economic Information

December 8, 2015Press Release

Israel’s foreign currency market in November 2015

1. The Exchange RateWeakening of the shekel against the dollar against the background of the dollar’s strengthening worldwide.

In November, the shekel weakened by about 0.3 percent against the dollar, and strengthened by about 3.6 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 1.5 percent in November.In November, the dollar strengthened by 4 percent against the euro, by 4.4 percent against the Swiss franc and by 2.2 percent against the British pound, In contrast, the dollar weakened by 1.4 percent against the Australian dollar.

2. Exchange Rate VolatilityA decrease 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 by about 3.2 percentage points in November, to 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 1.1 percentage points, to 9.9 percent at the end of November.The implied volatility in foreign exchange options in emerging markets also declined, to an average of about 10.8 percent in November, while the implied volatility in foreign exchange options in advanced economies increased, to an average of 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, while nonresidents’ relative share of total trading volume increased.

The total volume of trade in foreign currency in November was about $121 billion, compared with about $134 billion in October. Average daily trading volume declined by about 10 percent, to about $5.8 billion.

Bank of Israel - Israel’s foreign currency market in November 2015 Page 1 Of 8

The volume of trade in spot and forward transactions (conversions) was about $34 billion in November. Average daily trading volume in those transactions declined in November by about 13 percent compared with October.

The volume of trade in over the counter foreign currency options (which are not traded on the stock exchange) totaled about $7.6 billion in November. The average daily trading volume in those options was about $362 million in November, a decline of about 11 percent compared with October.

The trading volume of swap transactions was about $79 billion in November, compared with $85 billion in October. Average daily trading volume declined by about 8 percent from the previous month, to around $3.7 billion.

Nonresidents' share of total trade (spot and forward transactions, options and swaps) increased by about 1.5 percentage points, to about 32.7 percent at the end of November.

Bank of Israel - Israel’s foreign currency market in November 2015 Page 2 Of 8

Bank of Israel - Israel’s foreign currency market in November 2015 Page 3 Of 8

Bank of Israel - Israel’s foreign currency market in November 2015 Page 4 Of 8

Bank of Israel - Israel’s foreign currency market in November 2015 Page 5 Of 8

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

Conversions

(1) Swaps1

(2)

Cross Currency swap2 (3)

Options3

(4)

Total volume of trade

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

November2015

) Not final(

Total34,30878,6303417,603120,882 Daily average (21 days)1,6343,744163625,756Nonresidents9,73127,4092522,07439,466 of which Foreign financial institutions8,92826,21301,82636,967Residents24,57751,221895,52981,416 of which Real sector6,0596,474202,15714,710 Financial sector1,3626,459541258,000 Institutions (incl. insurance companies)5,2279,021151014,273 Individuals and provident funds1,8763,64504615,982 Other6,81920,32701,79828,944 Domestic banks3,2345,29509789,507

October 2015

Total39,58185,4611908,526133,758 Daily average (21 days)1,8854,07094066,369Nonresidents12,87225,8601202,84941,701 of which Foreign financial institutions11,97025,4911202,73640,317Residents26,70959,601705,67792,057 of which Real sector6,4417,395701,86215,768 Financial sector1,4148,3010739,788 Institutions (incl. insurance companies)5,32410,791035716,472 Individuals and provident funds2,4942,97505996,068 Other7,44824,07102,25333,772 Domestic banks3,5886,068053310,189

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.

Bank of Israel - Israel’s foreign currency market in November 2015 Page 6 Of 8

Bank of Israel - Israel’s foreign currency market in November 2015 Page 7 Of 8

Bank of Israel - Page 8 Of 8