Itaú BBA - BRL outperformed its peer currencies last week

FX and Capital Markets

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BRL outperformed its peer currencies last week

August 6, 2018

The BRL closed the week at 3.71, outperforming its peers.

(full report attached)

Although it ended the week virtually stable, the Brazilian currency outperformed its emerging market peers

Weaker-than-expected payroll figures in the U.S. cooled expectations of aggressive interest rate hikes and the dollar depreciated later in the week. In Brazil, the exchange rate closed the week at 3.71 reais per dollar, outperforming its peers (Charts 1, 2, 3 and 4).

Central Bank is still refraining from FX interventions

Last week, the monetary authority did not offer additional FX swap contracts or carry out line auctions, and rather just finished the rollover of contracts expiring in August. Its stock of FX swaps now stands at $67 billion (Charts 5 and 6).

Currency inflows in July

The currency flow was positive for a fourth consecutive week, driven by $37 million financial inflows and $150 million trade inflows. Month-to-date, the flow is positive by $4.4 billion (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 July

Foreign flows to the stock market are positive by $885 million this month, as $979 million inflows to the spot market offset $94 million outflows from the futures market (Chart 10).

Investors changed their FX derivatives positions

Non-residents reduced their position in dollar futures by $2.5 billion, while increasing their position in cupom cambial contracts by $2.6 billion. Institutional investors moved from a short position in dollar futures to a long position of $4.9 billion. Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of $37.6 billion, $10.9 billion and $17.7 billion, respectively (Charts 11, 12, 13 and 14). 

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