Itaú BBA - BRL hits strongest level since October

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BRL hits strongest level since October

January 30, 2017

The BRL appreciated against the greenback and closed at 3.14 reais per U.S. dollar, its strongest level since October

(full report attached)

Brazilian currency appreciated last week

After weaker-than-expected data on U.S. economic activity, the Brazilian currency appreciated against the greenback on Friday and closed at 3.14 reais per U.S. dollar, its strongest level since October. The real gained 1% from one week earlier, in line with its peers (Charts 1, 2, 3 and 4).

Central bank continues interventions in the FX market

Last week, the monetary authority continued to carry out auctions to roll over contracts expiring in February. Auctions took place every day (except on Wednesday) and another one is planned for today. The central bank’s short position in FX swaps now stands at $27 billion (Charts 5 and 6).

Currency outflows on January 16-20

Last week, there were $486 million financial outflows and $11 million trade inflows. In January, the currency flow is positive by $3.6 billion (Charts 7 and 8).

Brazilian company raises $750 million in bond sale

Last week, a Brazilian airline company issued $750 million in foreign bonds.  Brazilian corporate bond offerings total $6 billion year-to-date vs. $19 billion in 2016 (Chart 9 and table).

Foreign flows to the stock market are positive

Foreign flows to the stock market are positive by $1.4 billion in January, as $1.5 billion inflows to the spot market outsized US$ 90 million outflows from the futures market (Chart 10).

Investors maintain their positions in FX derivatives

Investor positions in FX derivatives were little changed last week. Non-residents, banks and institutional investors hold positions of $12.8 billion, $20.7 billion and $ -7.3 billion, respectively (Charts 11, 12, 13 and 14).
 



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