Itaú BBA - Another week of depreciation for the Brazilian real

FX and Capital Markets

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Another week of depreciation for the Brazilian real

February 18, 2015

The Brazilian real depreciated over the past week until the release of weaker U.S. retail sales data on Thursday.

(full report attached)

The exchange rate weakened beyond 2.85 reais per dollar, but retreated somewhat later in the week

The Brazilian real depreciated over the past week until the release of weaker U.S. retail sales data on Thursday. Later in the week, the currency regained some of these losses. Still, the real underperformed its peers for the second consecutive week, and the exchange rate closed at 2.83 reais per dollar (Charts 1, 2, 3 and 4).

The Brazilian Central Bank continued to intervene in the FX market 

The central bank continued to roll over contracts expiring in March at a pace of 13,000 contracts/day. If this pace is sustained until the end of the month, the central bank will roll over virtually the entire batch (Charts 5 and 6).

Positive currency flow in the first week of February

The currency flow was once again positive during the first week of February, with net inflows of US$ 823 million. Unlike previous weeks, however, commercial inflows were observed last week (Charts 7 and 8).

No new bond issuances abroad in the last week

No new bond issuances were announced last week. Year-to-date, bond issuances total US$ 400 million (Chart 9 and table).

Foreign flows to the stock market are positive in February

Flows to the stock market are positive by US$ 687 million, with flows into both spot and futures market (Chart 10).

Long positions in currency derivatives remained virtually flat during last week.

Last week, non-resident and institutional investors and banks marginally altered their long positions in currency derivatives (dollar futures, currency swaps and cupom cambial contracts) (Charts 11, 12 and 13).

Another week of net outflows from equity and fixed income funds dedicated to Brazil

During the week ended on February 11, there were again net outflows of US$ 34 million from equity funds and US$ 26 million from fixed income funds dedicated to Brazil. It was the fifth consecutive week of outflows from both types of funds (Charts 14 and 15).



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