Itaú BBA - Central Bank Announced More Line Auctions

FX and Capital Markets

< Back

Central Bank Announced More Line Auctions

December 15, 2014

The exchange rate depreciated last week and closed at 2.654 reais against the U.S. dollar

(full report attached)

Internal and external factors weighed on the Brazilian real last week

The exchange rate depreciated last week and closed at 2.654 reais against the U.S. dollar, 2.5% weaker than the previous week’s closing price. The strong dollar prevailed internationally, especially after the release of higher retail sales data in the U.S. Domestically, the currency was pressured further as some in the market read the minutes of the last decision by the Monetary Policy Committee (Copom) as dovish and there is uncertainty on whether the Central Bank’s swap program will continue (Charts 1, 2, 3 and 4).

Central Bank carried out three line auctions last week and announced a fourth one for today

In addition to rolling over FX swap contracts due in January, the Central Bank also carried out three line auctions of $1 billion each in the past week and announced a fourth one of the same amount for today. The monetary authority usually carries out such auctions in the end of every year to provide liquidity to the market during a period that is generally marked by outflows (Charts 5 and 6).

Currency flow is slightly negative in December

The contracted currency flow was negative in the first week of December, with $1 billion in financial outflows and $687 million in trade inflows (Charts 7 and 8).

No bond issuance in international markets yet in December

Borrowings abroad added up to $1.23 billion in November (Chart 9 and table).

Foreign flows to the stock market remain negative in December 

Flows to the stock market are negative by $1.5 billion in December, with outflows from both the futures and spot markets (Chart 10).

Exposures of institutional investors, non-residents and banks to FX derivatives were virtually unchanged last week

Institutional investors, banks and non-residents maintained their positions in FX derivatives (dollar futures, cupom cambial and swaps) at $51.6 billion, $36.6 billion and $34.4 billion, respectively (Charts 11 and 12).

Outflows from funds dedicated to Brazil continued last week  

For a fourth consecutive week there were outflows from funds dedicated to Brazil. During the week ended on December 10, equity funds and fixed income funds posted net outflows of $305 million and $176 million, respectively (Charts 13 and 14).



< Back