Itaú BBA - BRL hits its weakest levels since May 2017

FX and Capital Markets

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BRL hits its weakest levels since May 2017

April 9, 2018

The exchange rate reached 3.37 reais per dollar, underperforming its peers.

(full report attached)

The exchange rate closed the week at 3.37 reais per dollar

Escalating trade tensions between the U.S. and China pressured the Brazilian currency last week. The exchange rate reached 3.37 reais per dollar, depreciating 1.9% during the week and underperforming its peers (Charts 1, 2, 3 and 4).

Central Bank announced the rollover of FX contracts expiring in May 

Today the monetary authority will start to roll over $2.6 billion in FX swap contracts due in May. If the same pace is maintained until the end of the month, contracts will be fully rolled over. The Central Bank’s stock of FX swaps now stands at $24 billion (Charts 5 and 6).

Hefty financial outflows lead to negative currency balance in March

The currency flow was negative by the end of March, as $10.5 billion financial outflows outsized $6.5 billion trade inflows (Charts 7 and 8).

No external bond issuances last week 

There were no new bond issuances abroad by Brazilian companies last week. Year-to-date, Brazilian bond offerings overseas total $13.0 billion (Chart 9 and table).

Foreign flows to the stock market are positive in early April

Foreign flows to the stock market are positive in the first days of the month, with $133 million inflows to the futures market and $131 million inflows to the spot market (Chart 10).

Investors changed their positions in dollar futures

Non-residents increased their position in dollar futures by $4.3 billion, while reducing their position in cupom cambial by $1.2 billion. Institutional investors cut their short position in dollar futures by $3.2 billion and boosted their short position in cupom cambial by $5.0 billion. Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of $15.8 billion, $12.7 billion and -$4.5 billion, respectively (Charts 11, 12, 13 and 14).



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