Itaú BBA - BRL underperforms its peers during the week

FX and Capital Markets

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BRL underperforms its peers during the week

December 5, 2016

Brazilian currency depreciated 1.8% last week.

(full report attached)

Brazilian currency depreciated 1.8% last week

Political developments and protests pressured the exchange rate, which closed the week at 3.48 reais per U.S. dollar. The Brazilian currency weakened 1.8%, while its peers appreciated during the week (Charts 1, 2, 3 and 4).

Central bank started the rollover of FX swap contracts expiring in January

Last week, the monetary authority offered 15,000 FX swap contracts to roll over contracts due in January and announced the auction of 15,000 additional contracts today. The central bank’s short position in FX swaps stands at $27 billion (Charts 5 and 6).

Currency inflows last week

Last week, $1.6 billion financial inflows and $1.1 billion trade inflows were registered. In November, the flow was positive by $5.2 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 $628 million in November, as $859 million outflows from the spot market outsized $231 million inflows to the futures market (Chart 10).

Investors changed their positions in FX derivatives

Non-residents reduced their long position in dollar futures by $2.2 billion, while increasing their long position incupom cambial by $2 billion. Institutional investors expanded their short position in dollar futures by $2.3 billion and their long position in FX swaps by $2 billion. Non-residents, banks and institutional investors hold positions of $12.5 billion, $20.6 billion and $ -3.8 billion, respectively (Charts 11, 12, 13 and 14).


 

 



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