Itaú BBA - BRL continues to strengthen amid a benign external environment

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BRL continues to strengthen amid a benign external environment

July 31, 2017

The BRL ended the week at 3.13 reais per dollar, appreciating 0.4% from the previous week.

(full report attached)

Another week of weak U.S. dollar 

The U.S. Federal Reserve signaled that it will start to unwind its balance sheet soon (possibly in September), maintaining the message that the pace of interest rate hikes will be gradual and acknowledging that inflation remains low. The Brazilian currency ended the week at 3.13 reais per dollar, appreciating 0.4% from the previous week (Charts 1, 2, 3 and 4).

Central Banks finishes the rollover of FX swap contracts expiring in August

The monetary authority ended the rollover of swap contracts due in August. Its stock of FX swaps now stands at $28 billion (Charts 5 and 6). 

Currency flow was virtually zero in the third week of July

The currency flow was virtually zero on July 17-21, registering $330 million financial outflows and $390 million trade inflows. Month-to-date, the currency flow is negative by $2.9 billion (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 vs. $16.7 billion a year ago (Chart 9 and table).   

Foreign flows to the stock market are positive in July

Foreign flows to the stock market are positive by $181.3 million in July, as $932.4 million inflows to the spot market outsized $751.2 million outflows from the futures market (Chart 10).

Investor positions in FX derivatives are virtually unchanged

There were few changes in investors’ FX derivatives positions last week. Non-residents, banks and institutional investors hold positions of $13.7 billion, $14.5 billion and - $1.5 billion, respectively (Charts 11, 12, 13 and 14).


 



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