Itaú BBA - BRL strengthens along with commodity prices

FX and Capital Markets

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BRL strengthens along with commodity prices

February 20, 2017

Rising commodity prices and expectations of larger inflows to Brazil boosted the BRL last week

(full report attached)

Brazilian currency outperformed its peers last week

Rising commodity prices and expectations of larger inflows to Brazil boosted the Brazilian currency last week, which appreciated 0.56% from the previous week and outperformed its peers (Charts 1, 2, 3 and 4).

Central bank starts to roll over contracts expiring in March

Last week, the monetary authority started to roll over contracts due in March, at a pace of 6,000 contracts per day. If this pace is sustained until the end of the month, the central bank will allow expiration of $4.5 billion in contracts. The outstanding amount of FX swaps stands at $27 billion (Charts 5 and 6).

Currency outflows on February 6-10

Last week, $859 million financial outflows outsized $213 million trade inflows. In February, the flow is negative by $2.4 billion (Charts 7 and 8).

No external bond issuances last week 

There were no bond issuances abroad by Brazilian companies last week. Brazilian corporate bond offerings total $7.7 billion year-to-date (Chart 9 and table).   

Foreign flows to the stock market are positive

Foreign flows to the stock market are positive by $268 million in February, as $567 million inflows to the spot market outsized $299 million outflows from the futures market (Chart 10).

Non-residents reduce their positions in dollar futures

Last week, non-residents reduced their long position in dollar futures by $1.5 billion. Non-residents, banks and institutional investors hold positions of $10.2 billion, $21.1 billion and $ -5 billion, respectively (Charts 11, 12, 13 and 14).


 



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