Itaú BBA - BRL appreciates with favorable data in Brazil and in the U.S.

FX and Capital Markets

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BRL appreciates with favorable data in Brazil and in the U.S.

September 4, 2017

The BRL closed the week at 3.14 reais per U.S. dollar, appreciating 0.6%.

(full report attached)

U.S. employment data and Brazilian GDP release supported the currency.

Last Friday, the release of weaker-than-expected U.S. labor market data reinforced the hypothesis of gradual interest rate hikes, benefiting flows to emerging currencies. Domestically, the positive surprise of the second quarter GDP also contributed to foster investor optimism. The Brazilian currency closed the week at 3.14 reais per U.S. dollar, appreciating 0.6%, in line with peer currencies. (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. The stock of FX swaps now stands at $28 billion (Charts 5 and 6).

Slightly negative currency flows in August.

After a few weeks of positive readings, the currency flow was negative by $141 million in August. On August 21-25, the flow was negative by $3.6 billion, with $3.6 billion financial outflows and only $3 million 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 $16.3 billion year-to-date, compared to $17.7 billion one year ago (Chart 9 and table).

Foreign flows are negative in August.

Foreign flows to the stock market are negative by $1.1 billion in August, with $2.1 billion outflows from the futures market outsizing $1.0 billion inflows to the spot market. (Chart 10).

Investors significantly alter their positions in dollar futures.

Last week, non-residents shifted from a $510 million long position in dollar futures to a $1.4 billion short position. Institutional investors, in turn, increased their short positions in the derivative from $1.4 billion to $2.8 billion. Non-residents, banks and institutional investors hold positions of $12.8 billion, $15.8 billion and -$1.7 billion, respectively (Charts 11, 12, 13 and 14).


 



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