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Dollar strengthens on U.S. labor market figures

February 5, 2018

Pickup in wage inflation in the U.S. boosted the dollar against many currencies

(full report attached)
 

Pickup in wage inflation in the U.S. boosted the dollar

Friday’s release of stronger-than-expected wage inflation data in the U.S. increased bets on more intense monetary tightening by the Federal Reserve in 2018. This move boosted the dollar against many currencies late in the week. The exchange rate closed the week at 3.22 reais per dollar, depreciating 2.2% and underperforming its peers (Charts 1, 2, 3 and 4).

Central Bank did not intervene in the FX market

The monetary authority did not intervene in the FX market last week. Its stock of FX swaps now stands at $24 billion (Charts 5 and 6). 

Currency flow is positive by $4.5 billion in January

The currency flow remained positive in January. Last week, the flow was virtually zero, as $2.1 billion financial outflows offset US$ 2.2 billion trade inflows. As of January 26, there were $4.5 billion net inflows (Charts 7 and 8).

No external bond issuances last week 

There were no bond issuances abroad by Brazilian companies last week. In January, Brazilian bond offerings totaled $6.9 billion (Chart 9 and table).  

Foreign flows to the stock market are positive in January

Foreign flows to the stock market are positive by $2.4 billion in January, as $2.9 billion inflows to the spot market outsized $520 million outflows from the futures market (Chart 10).

Investors maintained their FX derivatives positions 

Last week, investors kept their FX derivatives positions virtually unchanged. Non-residents, banks and institutional investors hold FX derivative positions (dollar futures, cupom cambial and swaps) of $16.3 billion, $13.1 billion and $ -6.3 billion, respectively (Charts 11, 12, 13 and 14).



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