Itaú BBA - BRL strengthens on fiscal reforms expectations

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BRL strengthens on fiscal reforms expectations

December 12, 2016

The BRL appreciated on expectations of the spending cap bill vote and on the fact that the Pension Reform was sent to Congress.

(full report attached)

Brazilian currency appreciated 2.9% last week

After a volatile beginning of the week due to the political situation, the BRL appreciated on expectations of the spending cap bill second round vote in the Senate and on the fact that the Pension Reform was sent to Congress. Last week, the real strengthened 2.9%, in line with its peers (Charts 1, 2, 3 and 4).

Central bank maintained the rollover of FX swap contracts

Last week, the monetary authority carried out daily auctions of 15,000 FX swap contracts to roll over contracts expiring in January. An auction of 9,995 contracts was announced to take place today. The central bank’s short position in FX swaps stands at $27 billion (Charts 5 and 6).

Currency inflows last week

Last week, $1.3 billion trade inflows outsized $1.2 billion financial outflows. In December, the currency flow is positive by $1.5 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 $19 billion year-to-date vs. $8 billion in 2015(Chart 9 and table).   

Foreign flows to the stock market are negative

Foreign flows to the stock market are negative by $3 million in December, as $170 million outflows from the spot market outsized $167 million inflows to the futures market (Chart 10).

Non-residents changed their positions in dollar futures

Non-residents reduced their long position in dollar futures by $2.0 billion. Non-residents, banks and institutional investors hold positions of $10.5 billion, $22.4 billion and $ -3.5 billion, respectively (Charts 11, 12, 13 and 14).

 

 



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