Itaú BBA - BRL hits another low against the dollar

FX and Capital Markets

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BRL hits another low against the dollar

September 17, 2018

The Brazilian currency remained under pressure last week and hit 4.21 reais per dollar

(full report attached)

Exchange rate reached 4.21 reais per dollar

The Brazilian currency remained under pressure last week and hit its lowest level on record against the greenback. Notwithstanding some relief later in the week, the exchange rate closed on Friday at 4.17 reais per dollar, depreciating 2.8% and underperforming its peers (Charts 1, 2, 3 and 4).

Central Bank did not intervene in the FX market last week

Last week, the monetary authority did not offer additional FX swap contracts or carry out line auctions, and rather just rolled over of contracts expiring in October. Its stock of FX swaps now stands at $69 billion (Charts 5 and 6).

Currency outflows in September

The currency flow was negative in the first week of the month, as $1.0 billion financial outflows outsized $154 million trade inflows (Charts 7 and 8).

No external bond issuances last week

There were no issuances by Brazilian companies abroad last week. Year-to-date, Brazilian bond offerings overseas total $15.6 billion (Chart 9 and table).

Foreign flows to the stock market were slightly positive in September

Foreign flows to the stock market are slightly positive by $27 million month-to-date, driven by $165 million outflows from the spot market and $192 million inflows to the futures market (Chart 10).

Institutional investors reduce their short position in dollar futures 

Institutional investors reduced their short position in dollar futures by $1.0 billion. Other investor positions were virtually unchanged. Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of $37.4 billion, $12.3 billion and $18.4 billion, respectively (Charts 11, 12, 13 and 14).



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