Itaú BBA - Central Bank maintains FX interventions

FX and Capital Markets

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Central Bank maintains FX interventions

June 18, 2018

BRL rebounded after Central Bank intervention extension was announced

(full report attached)

BRL rebounded after intervention extension was announced 

The Brazilian currency strengthened on Friday after the Central Bank announced that it will maintain FX swap offers during this week. The exchange rate closed last week at 3.72 reais per U.S. dollar, depreciating 0.6% but outperforming its peers (Charts 1, 2, 3 and 4).

Central Bank announced that additional swap offers will be maintained

Last week, the monetary authority offered a total of $20.75 billion in FX swap contracts. For the current week, the Central Bank announced plans to offer around $10 billion in contracts — an amount that may be adjusted depending on market conditions. Its stock of FX swaps now stands at $62 billion (Charts 5 and 6). 

Currency inflows in June 

The currency flow was positive for a second consecutive week, driven by $1.9 billion financial inflows and $1.5 billion trade inflows. Month-to-date, the flow is positive by $4.7 billion (Charts 7 and 8).

No external bond issuances last week 

There were no issuances by Brazilian companies abroad last week. Year-to-date, Brazilian bond offerings overseas total $15.1 billion (Chart 9 and table).  

Foreign flows to the stock market are positive

Foreign flows to the stock market are positive in June, as $2.0 billion inflows to the futures market outsized $1.2 billion outflows from the spot market (Chart 10).

Institutional investors increased their FX swap position 

Institutional investors boosted their position in FX swaps by $7.2 billion. Meanwhile, non-residents expanded their position in dollar futures by $3.6 billion. Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of $32.8 billion, $9.0 billion and $4.4 billion, respectively (Charts 11, 12, 13 and 14).

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