Itaú BBA - Brazilian real underperformed its peers last week

FX and Capital Markets

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Brazilian real underperformed its peers last week

October 19, 2015

On Friday, political uncertainties once again weighed on the currency.

(full report attached)

Domestic uncertainties weighed on the exchange rate in the end of the week 

Throughout the past week, the real followed the external scenario and appreciated, notwithstanding Brazil’s sovereign ratings downgrade by Fitch. On Friday, however, political uncertainties once again weighed on the currency. The exchange rate closed the week at 3.92 reais per U.S. dollar, weakening 4.1% and underperforming its peers (Charts 1, 2, 3 and 4).

Central bank maintains FX swap rollovers

The monetary authority maintained the rollover of swap contracts expiring in November at a pace of 10,275 contracts per day.  If this pace is sustained, contracts will be fully rolled over for a third consecutive month (Charts 5 and 6).

Currency flow was positive during the week

The currency flow was positive in the past week, after two weeks of negative readings. The balance in the latest week was positive by $737 million, as $1.4 billion in financial inflows offset $640 million in trade outflows (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 positive in October

Foreign flows to the stock market are positive by $1.1 billion in October, with $205 million in inflows to the futures market and $934 million in inflows to the spot market (Chart 10).

Investor positions in FX derivatives were virtually unchanged

Investor positions in FX derivatives were virtually unchanged, standing at $32 billion for non-residents, $50 billion for banks and $24 billion for institutional investors (Charts 11, 12, 13 and 14).


 



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