The Bank of Israel published its fourth quarter 2025 review of Israel’s foreign currency market, reporting that the shekel strengthened by about 3.5 percent against the US dollar and the euro and by a similar rate in nominal effective terms against the currencies of Israel’s main trading partners. The update also shows a decline in both actual and implied shekel dollar volatility alongside a rise in foreign exchange trading volumes. Actual shekel dollar volatility (standard deviation of exchange rate changes) fell by 1.3 percentage points to an average of 8.1 percent, while implied volatility in over-the-counter shekel dollar options fell by 0.5 percentage points to about 8.8 percent at the end of the quarter. Activity by market segment was mixed, with institutional investors recording net foreign exchange sales of about USD 13.2 billion, while nonresidents shifted to net purchases of about USD 1.7 billion and the business sector and financial sector made net purchases of about USD 5.7 billion and USD 0.8 billion, respectively. Average daily trading volume versus the domestic banking system rose by about 21.5 percent to USD 14.9 billion, driven mainly by swaps, and nonresidents’ share of total trading volume versus domestic banks increased to about 41.5 percent; in estimated spot and forward trading excluding swaps and options, nonresidents’ share was about 85 percent, with trade between nonresidents accounting for about 77 percent of volume (USD 17.9 billion daily average).

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