Itaú BBA - Central bank signals full rollover of FX swap contracts expiring in May

FX and Capital Markets

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Central bank signals full rollover of FX swap contracts expiring in May

April 17, 2017

The outstanding amount of FX swap contracts now stands at $18 billion

(full report attached)

Domestic uncertainties continue to pressure the exchange rate 

A statement by U.S. President regarding monetary policy weakened the dollar last week, but headlines on Brazilian politics increased uncertainties surrounding the approval of fiscal reforms, pressuring the local currency. The real was virtually stable compared to one week earlier, underperforming its peers (Charts 1, 2, 3 and 4).

Central bank starts to roll over FX swap contracts due in May

Last week, the monetary authority announced it would start to roll over contracts due in May, at a pace of 16,000 contracts per day. If this pace is sustained throughout the month, the central bank will fully roll over contracts expiring in May. The outstanding amount of FX swap contracts now stands at $18 billion (Charts 5 and 6).

Currency inflows on April 03-07

During the first week of April, there were $1.1 billion financial inflows and $1.9 billion trade inflows (Charts 7 and 8).

No external bond issuances last week 

There were no bond issuances abroad by Brazilian companies last week. Brazilian corporate bond offerings totaled $2.25 billion in March and $10 billion year-to-date (Chart 9 and table).   

Foreign flows to the stock market are positive

Foreign flows to the stock market are positive by $815 million in April, driven by $303 million inflows to the spot market and $512 million inflows to the futures market (Chart 10).

Non-residents changed their position in dollar futures 

Last week, non-residents increased their long position in dollar futures by $1.4 billion. Non-residents, banks and institutional investors hold positions of $13 billion, $11.3 billion and $ -7.8 billion, respectively (Charts 11, 12, 13 and 14).



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