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BRL and peers show strong performance during the week

July 17, 2017

Approval of the labor reform in the Senate and lower-than-expected inflation in the U.S. boost the BRL during the week

(full report attached)

Approval of the labor reform in the Senate and U.S. data boost the Brazilian currency

Slower retail sales and lower-than-expected inflation in the U.S. caused the greenback to weaken against several emerging market currencies. Domestically, the approval of the labor reform in the Senate also boosted the real against the dollar last week. The exchange rate closed the week at 3.18 reais per dollar, gaining 3.2% from the previous week and outperforming its peers (Charts 1, 2, 3 and 4).

Central Bank maintains the rollover pace of FX swap contracts expiring in August

The monetary authority maintained the rollover pace of FX swap contracts expiring in August at 8,300 per day, and announced that another transaction will take place today. If this pace is sustained until the end of the month, contracts will be fully rolled over. The Central Bank’s stock of FX swaps now stands at $28 billion (Charts 5 and 6)

Currency outflows in the first week of July

Last week, the currency flow was negative, as $2.4 billion financial outflows outsized $1.2 billion trade inflows (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 $16 billion year-to-date vs. $16.7 billion a year ago (Chart 9 and table).   

Foreign flows to the stock market are slightly negative in July

Foreign flows to the stock marketare negative by $72 million in July, as $321 million outflows from the futures market outsized $249 million inflows to the spot market (Chart 10).

Non-residents increased their position in dollar futures

Last week, non-residents increased their short position in dollar futures by $1.6 billion. Non-residents, banks and institutional investors hold positions of $13 billion, $14.8 billion and - $608 million, respectively (Charts 11, 12, 13 and 14).


 



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