Itaú BBA - BRL outperforms peers during the week

FX and Capital Markets

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BRL outperforms peers during the week

July 23, 2018

The exchange rate appreciated and closed at its strongest level since last month

(full report attached)
 

Brazilian currency strengthened last week to close at 3.77

The exchange rate appreciated and closed at its strongest level since last month, at 3.77 reais per U.S. dollar on Friday. The real gained 0.3% during the period and outperformed 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 continued to roll over 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 last week, as $2.1 billion financial inflows offset $286 million trade outflows. Month-to-date, the flow is positive by $3.8 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 $1.3 billion this month, driven by $1.2 billion inflows to the spot market and $179 million inflows to the futures market (Chart 10).

Investors increased position in dollar futures

Non-residents increased their position in dollar futures by $2.1 billion. Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of $38.9 billion, $10.7 billion and $16.2 billion, respectively (Charts 11, 12, 13 and 14).



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