Itaú BBA - Currency flow becomes positive again

FX and Capital Markets

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Currency flow becomes positive again

August 17, 2015

The financial flow became positive after 11 weeks of outflows

(full report attached)

Exchange rate traded around 3.50 reais per U.S. dollar, driven by China and domestic factors 

In the domestic scenario, political and economic uncertainties continue to pressure the Brazilian currency. Internationally, the change in China’s exchange rate fixing mechanism and depreciation in the renminbi impacted the Brazilianreal and other currencies. The exchange rate closed the week at 3.48 reais per dollar, strengthening 0.7% and outperforming its peers (Charts 1, 2, 3 and 4).

Central bank continues full rollover of FX swap contracts

The monetary authority continued to roll over the $10.0 billion in swap contracts expiring in September at a pace of 11,000 contracts per day, meaning that the total batch will be 100% rolled over (Charts 5 and 6).

Currency flow becomes positive again in the first week of August

The currency flow was positive in the first week of August, with $799 million in trade inflows and $128 million in financial inflows. The financial flow became positive after 11 weeks of outflows (Charts 7 and 8).

No external bond issuance last week

No bonds were issued by Brazilian companies overseas. Year-to-date, issuances add up to $8 billion (Chart 9 and table).

Foreign flows to the stock market are slightly positive in August

Foreign flows to the stock market are positive by $88 million in August, as inflows to the futures market outsize outflows from the spot market (Chart 10).

Foreign and institutional investors and banks kept their long positions in FX derivatives virtually unchanged

Non-resident and institutional investors and banks barely changed their long positions in FX derivatives in the past week. Their positions stand at $34.8 billion, $21.7 billion and $42.1 billion, respectively (Charts 11, 12, 13 and 14).


 



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