Itaú BBA - BRL reaches its weakest level in 2018

FX and Capital Markets

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BRL reaches its weakest level in 2018

March 26, 2018

The Brazilian currency depreciated 1.0%, underperforming its peers

(full report attached)
 

Global scenario continued to pressure emerging market currencies last week

Escalating trade tensions between the U.S. and China pressured emerging market currencies last week. The exchange rate closed the week at 3.31 reais per dollar, its weakest level since December 2017. The Brazilian currency depreciated 1.0%, underperforming its peers (Charts 1, 2, 3 and 4).

Central Bank continued to roll over FX contracts expiring in April

The monetary authority continued to roll over FX swap contracts due in April. If this pace is sustained until the end of the month, such contracts will be fully rolled over, adding up to $9.0 billion. The Central Bank’s stock of FX swaps now stands at $24 billion (Charts 5 and 6).

Currency outflows in March

The currency flow is negative in March, as $7.4 billion financial outflows outsized $3.2 billion trade inflows. Month-to-date, the flow is negative by $4.2 billion (Charts 7 and 8).

No external bond issuances last week 

There were no new bond issuances abroad by Brazilian companies last week. Year-to-date, Brazilian bond offerings overseas total $13.0 billion (Chart 9 and table).  

Foreign flows to the stock market are negative in March

Foreign flows to the stock market are negative by $1.7 billion in March, driven by $387 million outflows from the futures market and $1.3 billion outflows from the spot market (Chart 10).

Non-residents reduced their position in dollar futures 

Non-residents reduced their position in dollar futures by $973 million. Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of $15.5 billion, $15.6 billion and $ -7.2 billion, respectively (Charts 11, 12, 13 and 14).



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