Itaú BBA - BRL underperformed peer currencies last week

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BRL underperformed peer currencies last week

June 25, 2018

The Brazilian currency closed the week at 3.79 reais per dollar, depreciating 1.5%

(full report attached)

Exchange rate closed the week at 3.79 reais per U.S. dollar

Concerns surrounding a trade war between the U.S. and China were rekindled in recent weeks, pressuring FX markets. The Brazilian currency closed the week at 3.79 reais per dollar, depreciating 1.5% and underperforming its peers (Charts 1, 2, 3 and 4).

Central Bank announced that additional swap offers will be maintained

Last week, the monetary authority offered a total of $5.0 billion in FX swap contracts. For the current week, the Central Bank announced that it will continue to offer FX swaps and carry out a $3.0 billion line auction. Its stock of FX swaps now stands at $67 billion (Charts 5 and 6).

Currency inflows in June

The currency flow remains positive this month. Last week, $406 million financial inflows offset $361 million trade outflows. Month-to-date, the flow is positive by $4.8 billion (Charts 7 and 8).

No external bond issuances last week

There were no issuances by Brazilian companies abroad last week. Year-to-date, Brazilian bond offerings overseas total $15.1 billion (Chart 9 and table).  

Foreign flows to the stock market are slightly negative

Foreign flows to the stock market are negative by $89 million in June, as $1.8 billion outflows from the spot market outsized $1.7 billion inflows to the futures market (Chart 10).

Institutional investors increased their FX swap position

Institutional investors increased their position in FX swaps by $6.1 billion. Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of $34.3 billion, $14.7 billion and $14.1 billion, respectively (Charts 11, 12, 13 and 14).



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