Itaú BBA - BRL rebounds to below 4.00

FX and Capital Markets

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BRL rebounds to below 4.00

October 8, 2018

During a week marked by strong gains, the exchange rate closed at 3.84

(full report attached)
 

During a week marked by strong gains, the exchange rate closed at 3.84

Weaker-than-expected labor market figures in the U.S., released later in the week, favored emerging market assets. The Brazilian currency soared and traded again below 4.00 reais per dollar, ending Friday at 3.84 and outperforming its peers (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 September

The currency flow was negative by $6.1 billion last month, as $6.7 billion financial outflows trampled $596 million 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 $16.6 billion (Chart 9 and table).

Foreign flows to the stock market are negative in October

Foreign flows to the stock market are negative by $1.1 billion this month, as $1.3 billion outflows from the futures market offset $204 million inflows to the spot market (Chart 10).

Non-residents increased their position in dollar futures

Non-resident investors increased their position in dollar futures by $10.8 billion. Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of $38.1 billion, $12.5 billion and $16.2 billion, respectively (Charts 11, 12, 13 and 14).


 



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