Itaú BBA - BRL ends 1H17 close to 3.30

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BRL ends 1H17 close to 3.30

July 3, 2017

The BRL ended the week at 3.31 reais per U.S. dollar, outperforming its peers

(full report attached)

Brazilian currency outperforms its peers in the week.

The approval of the labor reform in the Senate’s Constitution and Justice Commission increased expectations regarding the approval of fiscal reforms and provided support to the Brazilian currency last week. The BRL ended the week at 3.31 reais per U.S. dollar, appreciating 1% from one week earlier and outperforming its peers (Charts 1, 2, 3 and 4).

Central Bank completes rollover of FX swap contracts expiring in July.

Last week, the monetary authority completed the rollover of FX swap contracts expiring in July. The stock of FX swaps now stands at $28 billion (Charts 5 and 6).

Currency outflows on June 19-23.

The currency flow was negative last week, as $2.83 billion financial outflows outsized $955 million trade inflows. In June, the flow was negative by $5.3 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 billion year-to-date, compared to $11.5 billion in the same period last year (Chart 9 and table).

Positive foreign flows in June.

Foreign flows to the stock market are positive by $273 million in June, as $673 million inflows to the futures market outsized $ 400 million outflows from the spot market (Chart 10).

Institutional investors adopt short positions in dollar futures.

Last week, institutional investors reduced their long positions in dollar futures by $2.8 billion, adopting shorts positions in this derivative. In addition, they reduced their short positions in FX coupon by $1.1 billion. Non-residents, banks and institutional investors hold positions of $12.6 billion, $13.5 billion and $459 million, respectively (Charts 11, 12, 13 and 14).


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