Itaú BBA - BRL outperforms peer currencies during the week

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BRL outperforms peer currencies during the week

May 8, 2017

The approval of the pension reform by a special committee in the Lower House enabled the BRL to outperform its peers.

(full report attached)

BRL remains virtually stable in a week of emerging market currencies depreciation

Falling commodity prices last week pressured several emerging currencies, including the Brazilian real. However, the approval of the pension reform by a special committee in the Lower House enabled it to outperform its peers, closing the week at 3.18 reais per U.S. dollar (Charts 1, 2, 3 and 4).

Central bank did not intervene in the FX market last week

Last week, the monetary authority did not intervene in the FX market. The outstanding amount of FX swap contracts now stands at $18 billion (Charts 5 and 6).

Substantial currency inflows in April

April ended with a strong currency inflow of $9.1 billion. In the final week of the month, $2.9 billion trade inflows outsized $1.3 billion financial outflows (Charts 7 and 8).

$1 billion raised abroad last week

Last week, a financial institution raised $1 billion in overseas markets. Year-to-date, external bond offers add up to $11.7 billion vs. $9 billion in the year-earlier period (Chart 9 e table).

Foreign flows to the stock market are negative

Foreign flows to the stock market are negative by $139 million in May, as $255 million outflows from the futures market outsized $116 million inflows to the spot market (Chart 10).

Investors changed their positions in FX derivatives

Last week, non-residents increased their long position in dollar futures by $1.8 billion, while reducing their long position in cupom cambial by $2.1 billion. Institutional investors expanded their short position in dollar futures by $1.7 billion. Non-residents, banks and institutional investors hold positions of $14 billion, $7.8 billion and $ -5.1 billion, respectively (Charts 11, 12, 13 and 14).


 


 



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