Itaú BBA - BRL outperforms its peers

FX and Capital Markets

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BRL outperforms its peers

April 4, 2016

A favorable external environment led to appreciation in emerging market currencies last week

(full report attached)

Brazilian currency strengthened last week 

A favorable external environment led to appreciation in emerging market currencies last week. The Brazilian real closed the week at 3.55 per U.S. dollar, strengthening 3.5% and outperforming its peers (Charts 1, 2, 3 and 4).

Central bank reduces FX swap rollovers

The monetary authority started to roll over contracts due in May at a pace of 5,500 contracts per day. If this pace is sustained until the end of the month, 50% of contracts will be rolled over and $5.2 billion will expire. The central bank also carried out three reverse FX swap auctions, totaling $1.3 billion (Charts 5 and 6).

Negative currency flow last week 

The currency flow was negative in the fourth week of March, as $2.4 billion financial outflows outsized $887 million trade inflows. Month-to-date, the flow is negative by $2.5 billion (Charts 7 and 8).

No external bond issuance by Brazilian companies last week

There were no issuances this year. Issuances added up to $8 billion in 2015 (Chart 9 and table).

Foreign flows to the stock market are positive

Foreign flows to the stock market remain positive in March, driven by $598 million outflows from the futures market and $2.0 billion inflows to the spot market (Chart 10).

Non-residents reduced their positions in FX derivatives

Foreign investors reduced their positions in dollar futures by $5.2 billion, but increased their positions in cupom cambial by $2.7 billion and FX swaps by $1.3 billion. Non-residents, banks and institutional investors hold positions of $24 billion, $53 billion and $24 billion, respectively (Charts 11, 12, 13 and 14).


 



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