Itaú BBA - Brazilian Real testing recent lows

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Brazilian Real testing recent lows

September 21, 2015

Domestic uncertainties and FED decision led Brazilian real to 3,95 reais per dollar.

(full report attached)

Brazilian real depreciated 1.9% and closed the week above 3.90

Early in the week, the announcement of measures aiming to reverse the primary deficit proposed in the budget for 2016 encouraged the market and the exchange rate receded to 3.82 reais per U.S. dollar. As the week went on, however, domestic uncertainties and those related to U.S. monetary policy pressured the exchange rate, which closed the week at 3.95. The real depreciated 1.89% during the week, while its peer currencies apreciated (Charts 1, 2, 3 and 4).

Central bank continued to roll over FX swap contracts expiring in October

The monetary authority maintained the rollover of contracts expiring in October at a pace of 9,450 contracts per day. If this pace is sustained until the end of the month, 100% of the total batch will be rolled over for a second consecutive month (Charts 5 and 6).

Currency flow is negative in September

The currency flow was negative in the past week, with $191 million in trade inflows and $1.1 billion in financial outflows. The flow in September is negative by $517 million (Charts 7 and 8).

No external bond issuance last week

No bonds were issued by Brazilian companies overseas. Year-to-date, issuances add up to $8 billion (Chart 9 and table).

Foreign flows to the stock market are slightly negative

Foreign flows to the stock market are negative by $47 million in September, with $288 million in inflows to the futures market and $335 million in outflows from the spot market (Chart 10).

Institutional investors, non-residents and banks maintained their long positions in FX derivatives virtually unchanged last week

Non-residents, banks and institutional investors hold positions of $32 billion, $45 billion and $21 billion, respectively (Charts 11, 12, 13 and 14).


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