Itaú BBA - Central bank increases interventions in the FX market

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Central bank increases interventions in the FX market

August 15, 2016

Since last Thursday, the central bank has been carrying out auctions of US$ 750 million

(full report attached)

Exchange rate reached 3.12 reais per U.S. dollar

After reaching its strongest level this year, the Brazilian real depreciated amid uncertainties surrounding the fiscal adjustment and more intense action by the Central Bank. The Brazilian currency closed the week at 3.19, weakening 0.8% and underperforming its peers. (Charts 1, 2, 3 and 4).

Central bank increased auction amounts last week

The monetary authority increased the amount of reverse swap contracts auctioned last week. Since last Thursday, the central bank has been carrying out auctions of US$ 750 million. Currently, the central bank’s short position stands at $47 billion (Charts 5 and 6).

Currency outflows in August

The currency flow is negative by $2.25 billion in August, driven by $291 million trade inflows and $1.96 billion financial outflows (Charts 7 and 8).

No Brazilian bond issuance abroad last week

There were no bond offers by Brazilian companies abroad last week. Year-to-date, issuances total $17.7 billion vs. $8 billion in 2015 (Chart 9 and table).

Negative foreign flows to the stock market

Foreign flows to the stock market are negative in August, dragged by $180 million outflows from the spot market and $103 million outflows from the futures market (Chart 10).

Institutional Investors reduced their positions in dollar futures

Institutional investors reduced their positions in dollar futures by $1.7 billion. Other positions in FX derivatives remained virtually unchanged. Non-residents, banks and institutional investors hold positions of $23 billion, $33 billion and $1.4 billion, respectively (Charts 11, 12, 13 and 14).


 


 

 



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