Itaú BBA - Brazilian currency appreciated last week

FX and Capital Markets

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Brazilian currency appreciated last week

May 15, 2017

Last week, greater market optimism regarding the approval of the pension reform in Congress supported appreciation in the local currency.

(full report attached)

Internal and external scenario supported the BRL

Last week, greater market optimism regarding the approval of the pension reform in Congress supported appreciation in the local currency. Externally, stabilization in key commodity prices benefitted some emerging market currencies, including the BRL. The exchange rate closed the week strongly appreciating 2.1%, at 3.12 reais per U.S. dollar, outperforming its peers (Charts 1, 2, 3 and 4).

Central bank did not intervene in the FX market last week

Last week, the monetary authority did not intervene in the FX market. The outstanding amount of FX swap contracts now stands at $18 billion (Charts 5 and 6).

Currency inflows during the first week of May

The currency flow is positive by $639 million in May, as $1.333 billion trade inflows outsized $694 million financial outflows (Charts 7 and 8).

No external bond issuances last week

There were no bond issuances abroad by Brazilian companies last week. Brazilian corporate bond offerings total $11.7 billion year-to-date vs. $9 billion one year earlier (Chart 9 and table).

Foreign flows to the stock market are negative

Foreign flows to the stock market are slightly negative by $12 million in May, as $162 million outflows from the futures market outsized $150 million inflows to the spot market (Chart 10).

Investors changed their positions in dollar futures

Last week, non-residents reduced their long position in dollar futures by $2.4 billion. Non-residents, banks and institutional investors hold positions of $11.6 billion, $9.4 billion and $ -4.5 billion, respectively (Charts 11, 12, 13 and 14).


 


 



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