Itaú BBA - BRL is still trading around 3.25

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BRL is still trading around 3.25

March 5, 2018

The Brazilian real continued to trade near 3.25 per dollar.

(full report attached)

Brazilian currency remains range-bound

Despite some pressure on emerging market currencies later in the week as global markets got more cautious due to protectionist measures adopted by the U.S. government, the Brazilian real continued to trade near 3.25 per dollar. The exchange rate closed the week at that very level, depreciating 0.4% and outperforming most of its peers (Charts 1, 2, 3 and 4).

Central Bank completed the rollover of contracts expiring in March

The monetary authority rolled over all FX swap contracts due in March, fully rolling over $6.2 billion expiring on March 1. Its stock of FX swaps now stands at $24 billion (Charts 5 and 6). 

Currency flow is negative 

After a few consecutive weeks of inflows, the currency flow turned negative in February, as $4.8 billion financial outflows outsized $141 million trade inflows. Hence, the monthly flow became negative by $ 2.7 billion (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 $7.9 billion (Chart 9 and table).  

Foreign flows to the stock market remain negative in February

Foreign flows to the stock market are negative by $888 million in February, as $1.3 billion outflows from the spot market topped $404 million inflows to the futures market (Chart 10).

Non-residents changed their FX derivatives positions 

Non-residents increased their position in dollar futures by $1.4 billion, while reducing their position in cupom cambial by $1.6 billion. Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of $19.7 billion, $9.1 billion and $ -4.6 billion, respectively (Charts 11, 12, 13 and 14).

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