Itaú BBA - BRL strengthens amid quieter international markets

FX and Capital Markets

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BRL strengthens amid quieter international markets

February 19, 2018

The exchange rate closed the week at 3.23 reais per dollar, appreciating 2.2%

(full report attached)
 

Emerging market currencies rebounded last week 

Although U.S. inflation printed above expectations, international markets improved significantly during the past week. The exchange rate closed the week at 3.23 reais per dollar, appreciating 2.2% and performing in line with most of its peers (Charts 1, 2, 3 and 4).

Central Bank continues to intervene in the FX market

The monetary authority continued to roll over FX swap contracts at a pace of 9,500 contracts per day. If this pace is sustained until the end of the month, contracts expiring in March will be fully rolled over. The Central Bank’s stock of FX swaps now stands at $24 billion (Charts 5 and 6). 

Currency flow remains positive 

The currency flow remains positive in February. Last week, $1.6 billion trade inflows outsized $568 million financial outflows. Month-to-date, the flow is net positive by $2.6 billion (Charts 7 and 8).

No external bond issuances last week 

There were no new bond issuances abroad by Brazilian companies last week. Year-to-date, Brazilian bond offerings overseas total $7.9 billion (Chart 9 and table).

Foreign flows to the stock market remain negative in February

Foreign flows to the stock market are negative by $512 million in February, as $1.3 billion outflows from the spot market offset $808 million inflows to the futures market (Chart 10).

FX derivatives positions were virtually unchanged last week 

Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of $20.0 billion, $8.6 billion and $ -4.5 billion, respectively (Charts 11, 12, 13 and 14).



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