Itaú BBA - BRL reaches its strongest level since May

FX and Capital Markets

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BRL reaches its strongest level since May

October 29, 2018

Even in a less favorable global scenario, the BRL outperformed its peers

(full report attached)

Exchange rate closed the week at 3.64 reais per U.S. dollar

The Brazilian real outperformed its peers for another week. Even in a global scenario that was less favorable to emerging market assets, the exchange rate appreciated 1.9% and ended Friday at 3.64 (Charts 1, 2, 3 and 4).

Central Bank did not intervene in the FX market last week

Last week, the monetary authority did not offer additional FX swap contracts or carry out line auctions, and rather just rolled over of contracts expiring in November. Its stock of FX swaps now stands at $69 billion (Charts 5 and 6).

Currency outflows in October 

The currency flow turned negative again in October, extending the trend seen in recent months. Last week was driven by $ 2.0 billion financial outflows and $118 million trade outflows (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 $17.1 billion (Chart 9 and table).

Foreign flows to the stock market are negative in October

Foreign flows to the stock market are negative by $5.8 billion this month, dragged by $5.2 billion outflows from the futures market (Chart 10).

Investors increase cupom cambial positions 

Non-residents increased their long position in cupom cambial by $1.4 billion, while institutional investors boosted their short position in this derivative by $1.4 billion. Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of $38.9 billion, $15.0 billion and $13.1 billion, respectively (Charts 11, 12, 13 and 14).

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