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Central Bank ramps up FX intervention

June 11, 2018

The Brazilian Central Bank ramped up intervention in the FX swap market and the BRL soared

(full report attached)
 

BRL soars after intervention announcement 

The Brazilian currency sank early last week to the lowest levels against the U.S. dollar since March 2016. However, losses were partly reversed after the monetary authority announced interventions in the FX market. The move caused on Friday the largest one-day gain in the real since October 2008. The exchange rate closed the week at 3.71 reais per dollar, appreciating 1.5% and outperforming its peers (Charts 1, 2, 3 and 4).

Central Bank ramped up intervention in the FX swap market

The monetary authority announced last week that it will offer an additional $25 billion in FX swap contracts until the end of this week. The Central Bank continues to carry out transactions to fully roll over the $8.8 billion in contracts expiring in July. Its stock of FX swaps now stands at $42 billion (Charts 5 and 6). 

Currency inflows in early June

The currency flow is positive in the beginning of the month, driven by $839 million financial inflows and $2.6 billion trade inflows (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 slightly positive

Foreign flows to the stock market are slightly positive in June, as $974 million inflows to the futures market outsized $592 million outflows from the spot market (Chart 10).

Institutional investors increased their FX swap position

Institutional investors increased their FX swap position by $3.4 billion, while non-residents expanded their position in dollar futures by $2.3 billion. Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of $29.3 billion, $2.3 billion and $3.4 billion, respectively (Charts 11, 12, 13 and 14).



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