Itaú BBA - BRL reaches its weakest level since 2016

FX and Capital Markets

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BRL reaches its weakest level since 2016

August 27, 2018

Exchange rate reached 4.13 reais per dollar during the week

(full report attached)

Exchange rate reached 4.13 reais per dollar during the week

The Brazilian currency depreciated for another week, reaching its weakest levels since 2016. The exchange rate reached 4.13 reais per U.S. dollar, but with some relief in the international environment, closed at 4.10 on Friday, depreciating 4.7% during the week and underperforming 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 finished the rollover of contracts expiring in September. Its stock of FX swaps now stands at $67 billion (Charts 5 and 6).

Currency outflows in August

The currency flow is negative by $2.5 billion month-to-date, after a few consecutive weeks of inflows. The financial flow has been negative for three weeks but was previously offset by trade inflows. Last week, $4.3 billion financial outflows outsized $1.5 billion trade inflows (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 August

Foreign flows to the stock market are positive by $1.8 billion this month, driven by $ 648 million inflows to the spot market and $1.1 billion inflows to the futures market (Chart 10).

Investor positions in FX derivatives are unchanged 

Investor positions in derivatives were virtually unchanged last week. Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of $37.4 billion, $12.1 billion and $17.6 billion, respectively (Charts 11, 12, 13 and 14).



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