Itaú BBA - Central Bank increases FX swap offers

FX and Capital Markets

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Central Bank increases FX swap offers

May 21, 2018

The Central bank announced an additional 15,000 swap contracts offer.

(full report attached)

Exchange rate hit its weakest level since March 2016

Firming expectations of higher interest rates in the U.S. strengthened the dollar last week and pressured emerging market currencies, with the BRL touching 3.77 reais per dollar. The exchange rate closed the week at 3.74, depreciating 3.7% and underperforming its peers (Charts 1, 2, 3 and 4).

Central Bank announces increase in FX swap offers

On Friday, the Central Bank announced a change in its intervention in the FX market. Along with offering 4,225 contracts per day to fully roll over the $5.7 billion expiring in June, it will offer today an additional 15,000 swap contracts (totaling $750 million). The monetary authority’s stock of FX swaps now stands at $25 billion (Charts 5 and 6).

Currency inflows in May

The currency flow remains positive in May. Last week, $1.84 billion trade inflows barely offset $1.76 billion financial outflows. Month-to-date, the flow is positive by $362 million (Charts 7 and 8).

A new bond placement abroad last week 

A chemical company issued $200 million in bonds due in 2024. Year-to-date, Brazilian bond offerings overseas total $15.1 billion (Chart 9 and table).  

Foreign flows to the stock market are positive in May

Foreign flows to the stock market are positive in May, as $321 million inflows to the futures market topped $21 million outflows from the spot market (Chart 10).

Non-residents increase their position in dollar futures 

Non-residents increased their position in dollar futures by $3.0 billion. Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of $23.1 billion, $2.2 billion and $ -1.4 billion, respectively (Charts 11, 12, 13 and 14).


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