Itaú BBA - Central Bank signals full rollover of FX swap contracts

FX and Capital Markets

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Central Bank signals full rollover of FX swap contracts

March 12, 2018

BRL virtually unchanged during a week marked by low volatility

(full report attached)
 

Exchange rate is virtually unchanged during a week marked by low volatility

The Brazilian currency appreciated early in the week, but reversed course as global markets reacted to protectionist measures announced by the U.S. government. The exchange rate closed the week virtually unchanged at 3.26 reais per dollar, weakening 0.1% (Charts 1, 2, 3 and 4).

Central Bank will start to roll over swap contracts expiring in April

On Friday, the monetary authority announced the rollover of 14,000 FX swap contracts due in April. If this pace is sustained until the end of the month, such contracts will be fully rolled over, adding up to $9.0 billion. The Central Bank’s stock of FX swaps now stands at $24 billion (Charts 5 and 6). 

Currency outflows in March

The currency flow was negative during the first week of the month, as $1.4 billion financial outflows outsized $851 million trade inflows. Hence, the monthly flow is negative by $565 million (Charts 7 and 8).

No external bond issuances last week 

There were no new bond issuances abroad by Brazilian companies last week. Year-to-date, Brazilian bond offerings overseas total $7.9 billion (Chart 9 and table).  

Foreign flows to the stock market are negative in March

Foreign flows to the stock market are negative by $953 million in March, driven by $285 million outflows from the futures market and $668 million outflows from the spot market (Chart 10).

Investors changed their positions in dollar futures

Non-residents reduced their position in dollar futures by $1.2 billion, while institutional investors increased their short position in the same derivative by $928 million. Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of $18.5 billion, $11.4 billion and $ -5.7 billion, respectively (Charts 11, 12, 13 and 14).



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