Itaú BBA - BRL reaches its weakest level since November 2016

FX and Capital Markets

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BRL reaches its weakest level since November 2016

April 30, 2018

The BRL traded above 3.50 last week, but closed the week at 3.46 reais per dollar

(full report attached)
 

Exchange rate traded above 3.50 last week

Early in the week, U.S. inflation and activity figures fueled concerns of more intense monetary tightening by the Federal Reserve, boosting the dollar. However, slower consumer spending data in the 1Q18 GDP report provided some relief to emerging market currencies, which rebounded later in the week. In the local market, the exchange rate closed the week at 3.46 reais per dollar, depreciating 1.3% and performing in line with its peers (Charts 1, 2, 3 and 4).

Central Bank finished the rollover of FX contracts expiring in May

The monetary authority completed the rollover of the $2.6 billion in FX swap contracts due in May. The Central Bank’s stock of FX swaps now stands at $24 billion (Charts 5 and 6).

Currency inflows in April

The currency flow is sharply positive in April, with $2.2 billion financial inflows and $833 million trade inflows last week. Month-to-date, the flow is positive by $8.8 billion (Charts 7 and 8).

New bond offering abroad

A local electricity company issued $600 million in bonds due in 2023. Year-to-date, Brazilian bond offerings overseas total $14.9 billion (Chart 9 and table).  

Foreign flows to the stock market are positive in April

Foreign flows to the stock market are positive this month, driven by $769 million inflows to the futures market and $1.1 billion inflows to the spot market (Chart 10).

Non-residents increased their position in dollar futures

Non-residents increased their position in dollar futures by $4.0 billion. Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of  $23.0 billion, $4.6 billion and $ -3.3 billion, respectively (Charts 11, 12, 13 and 14).


 



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