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Brexit pressured emerging market currencies

June 27, 2016

Britain’s vote to leave the European Union caused risk aversion and pressured emerging market currencies

(full report attached)

UK referendum caused risk aversion in international markets 

Britain’s vote to leave the European Union caused risk aversion and pressured emerging market currencies. Nevertheless, the Brazilian real strengthened 1.2% during the week and closed at 3.37 per U.S. dollar (Charts 1, 2, 3 and 4).

Central bank resumes interventions in the FX market

The monetary authority carried out one FX credit line auction of $4.4 billion last week. The central bank has not been offering FX swaps. Currently, its short position in swaps stands at $62 billion (Charts 5 and 6).

FX outflows in June

Financial flows remain negative June, despite inflows in the past week. In the third week of the month, there were $871 million financial inflows and $504 million trade inflows. During the month, the flow is negative by $300 million (Charts 7 and 8).

No bond issuance overseas last week

Brazilian companies did not offer debt abroad last week. Issuances overseas total $11.1 billion year-to-date, vs. $8 billion in 2015 (Chart 9 and table).

Foreign flows to the stock market are negative in June

Foreign flows to the stock market are negative in June, as $589 million outflows from the futures market outsized $449 million inflows to the spot market (Chart 10).

Non-residents increased their long positions in dollar futures

Non-residents increased their long positions in dollar futures by $1.4 billion, while other investor positions were virtually unchanged. Non-residents, banks and institutional investors hold positions of $26 billion, $37 billion and $13 billion, respectively (Charts 11, 12, 13 and 14).


 


 

 



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