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BRL appreciates amid a benign environment for EM

November 13, 2017

Greater risk appetite globally and government efforts to push reforms favored the BRL.

(full report attached)

Along with international scenario, outlook for reforms also supported the currency 

Emerging market currencies strengthened last week, thanks to greater risk appetite globally. Domestically, government efforts to push reforms, particularly the pension reform, also favored the Brazilian currency. The exchange rate closed the week at 3.28 reais per U.S. dollar, appreciating 0.9% and outperforming its peers (Charts 1, 2, 3 and 4).

Central Bank did not intervene in the FX market

The monetary authority did not intervene in the FX market last week. Its stock of FX swaps now stands at $24 billion (Charts 5 and 6).

Currency outflows in November

The currency flow is negative in November. Last week, $1.6 billion financial outflows outsized $641 million trade inflows. Month-to-date, the flow is negative by $1.3 billion (Charts 7 and 8).

New bond issuance abroad

A pulp and paper company issued $600 million in external bonds. Brazilian bond offerings total $27.1 billion year-to-date, topping the $20.4 billion issued during 2016 as a whole (Chart 9 and table).   

Foreign flows to the stock market are negative

Foreign flows to the stock market are negative by $195 million this month, as $563 million outflows from the spot market outsized $369 million inflows to the futures market (Chart 10).

Non-residents reduced their position in dollar futures

Last week, non-residents reduced their long position in dollar futures by $700 million to $2.6 billion, while institutional investors reduced their short position in dollar futures by $1.2 billion to $8.9 billion. Non-residents, banks and institutional investors hold positions of $17.2 billion, $11.2 billion and -$ -5.0 billion, respectively (Charts 11, 12, 13 and 14).



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