Itaú BBA - BRL tests new highs in 2016

FX and Capital Markets

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BRL tests new highs in 2016

March 7, 2016

The Brazilian currency closed at 3.75

(full report attached)

Exchange rate reached 3.66 reais per U.S. dollar during the last week

The Brazilian currency closed at 3.75, appreciating sharply during the week (by 6.58%) and outperforming its peers (Charts 1, 2, 3 and 4).

Central bank started to rollover FX swap contracts due in April

The monetary authority started to roll over contracts expiring in April. The central bank maintained the rollover pace of 9,600 contracts per day throughout the past week, except for Friday, when it offered only 8,000 contracts (Charts 5 and 6).

Strong currency outflows last week

The currency flow was negative last week, as $4.9 billion financial outflows outsized $58 million trade inflows. In February, the flow is negative by $6.0 billion (Charts 7 and 8).

No external bond issuance by Brazilian companies last week

There were no issuances this year. Issuances added up to $8 billion in 2015 (Chart 9 and table).

Foreign flows to the stock market were positive

Foreign flows to the stock market were positive in February and remained positive in the first week of March. There were $264 million inflows to the futures market and $443 million inflows to the spot market during the month (Chart 10).

Changes in investor positions in FX derivatives

Non-residents reduced their positions in dollar futures by $5.1 billion, while increasing their positions in cupom cambial by $2.3 billion. Institutional investors raised their positions in dollar futures by $3.9 billion and decreased their positions in cupom cambial by $1.3 billion. Non-residents, banks and institutional investors hold positions of $24 billion, $50 billion and $27 billion, respectively (Charts 11, 12, 13 and 14).


 



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