Itaú BBA - BRL hits new lows and Central Bank resumes interventions in the FX market

FX and Capital Markets

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BRL hits new lows and Central Bank resumes interventions in the FX market

September 3, 2018

The Brazilian real fell to as low as 4.21 per dollar on Thursday

(full report attached)

Exchange rate reached 4.21 reais per dollar

The Brazilian real fell to as low as 4.21 per dollar on Thursday. As the external environment improved and the Central Bank resumed interventions, the exchange rate rebounded and closed the week at 4.06. On a weekly basis, the local currency appreciated 1.22% and outperformed its peers (Charts 1, 2, 3 and 4).

Central Bank resumes interventions in the FX market

Last week, the monetary authority carried out an auction of $1.5 billion in FX swap contracts and a line auction involving $2.15 billion, the latter rolling over line contracts expiring in September. The Central Bank also announced the beginning of the full rollover of FX swap contracts expiring in October. Its stock of FX swaps now stands at $69 billion (Charts 5 and 6).

Currency outflows in August

The currency flow is negative by $3.0 billion in August, pressured by financial outflows. Last week, $1.8 billion financial outflows outsized $1.3 billion 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 are positive in August

Foreign flows to the stock market are positive by $2.1 billion in August, driven by $930 million inflows to the spot market and $1.2 billion inflows to the futures market (Chart 10).

Non-residents increased their positions in FX derivatives

Non-residents increased their position in dollar futures by $761 million and their position in cupom cambial by $703 million. Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of $38.9 billion, $10.3 billion and $17.5 billion, respectively (Charts 11, 12, 13 and 14).



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