Itaú BBA - BRL underperforms its peers

FX and Capital Markets

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BRL underperforms its peers

April 2, 2018

The BRL appreciated slightly (0.3%) but underperformed most of its peers

(full report attached)

More favorable global scenario supported emerging market currencies 

A better external environment, with increased global risk appetite, benefitted emerging market currencies later in the week. In Brazil, the exchange rate closed the week at 3.31 reais per dollar, appreciating 0.3% but underperforming most of its peers (Charts 1, 2, 3 and 4).

Central Bank completed the rollover of FX swap contracts expiring in April

The monetary authority completed the rollover of $9.0 billion in FX swap contracts due in April. The Central Bank’s stock of FX swaps now stands at $24 billion (Charts 5 and 6).

Currency outflows in March

The currency flow was negative in March, as $9.3 billion financial outflows outsized $4.7 billion trade inflows. During the month, the flow was negative by $4.6 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 $13.0 billion (Chart 9 and table).  

Foreign flows to the stock market were negative in March

Foreign flows to the stock market were negative by $2.2 billion in March, driven by $533 million outflows from the futures market and $1.7 billion outflows from the spot market (Chart 10).

Non-residents changed their position in dollar futures

Non-residents reduced their position in dollar futures by $3.1 billion, while boosting their position in cupom cambial by $1.5 billion. Institutional investors reduced their short position in dollar futures by $2.8 billion. Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of $14.0 billion, $14.7 billion and $ -4.4 billion, respectively (Charts 11, 12, 13 and 14).

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