Itaú BBA - BRL strengthens amid benign external scenario

FX and Capital Markets

< Back

BRL strengthens amid benign external scenario

January 8, 2018

The Brazilian real strengthened and returned to its November level.

(full report attached)
 

Risk-on sentiment favored emerging market currencies 

Amid a more benign international scenario for emerging market currencies, the Brazilian real strengthened and returned to its November level. The exchange rate closed the week at 3.23 reais per U.S. dollar, appreciating 2.6% and performing in line with its peers (Charts 1, 2, 3 and 4).

Central Bank did not intervene in the FX market

The monetary authority did not intervene in the FX market last week. Its stock of FX swaps now stands at $24 billion (Charts 5 and 6).

Currency flow was negative by $9.3 billion in December

The currency flow was negative in the final month of 2017, as hefty financial outflows of $15.6 billion outsized $6.3 billion trade inflows. The balance for the year was slightly positive, by $626 million (Charts 7 and 8).

No external bond issuances last week 

There were no bond issuances abroad by Brazilian companies last week. In 2017, Brazilian bond offerings totaled $31.9 billion (Chart 9 and table).   

Foreign flows to the stock market are slightly positive in January

Foreign flows to the stock market were slightly positive by $80 million in the first week of January, as $261 million inflows to the spot market topped $181 million outflows from the futures market (Chart 10).

Investors changed their positions in dollar futures 

Non-residents turned their long position in dollar futures into a short position, while institutional investors reduced their short position in this derivative by $5.0 billion. Furthermore, institutional investors reduced their position in FX swaps by $3.7 billion. Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of $10.6 billion, $16.3 billion and $ -3.5 billion, respectively (Charts 11, 12, 13 and 14).



< Back