Itaú BBA - Dollar weakens against emerging-market currencies

FX and Capital Markets

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Dollar weakens against emerging-market currencies

February 13, 2017

Real appreciates again due to better-than-expected data from China.

(full report attached)

Data on the Chinese economy provided a boost to the Brazilian currency.

Thanks to better-than-expected figures from China, the Brazilian currency strengthened again against the greenback and closed the week at 3.11 reais per U.S. dollar, appreciating 0.25% from the previous week and outperforming its peers (Charts 1, 2, 3 and 4).

Central bank did not intervene in the FX market last week.

Last week, the monetary authority did not interfere with the FX market.  Its stock of FX swaps now stands at $27 billion (Charts 5 and 6).

Currency outflows on January 30-February 3.

That week, there were $2.6 billion financial outflows and $1.7 billion trade inflows. In February, the flow is negative by $1.8 billion (Charts 7 and 8).

Foreign borrowings of $1 billion last week.

Last week, a Brazilian mining company issued $1 billion in bonds abroad. Brazilian corporate bond offerings total $7.7 billion year-to-date vs. $19 billion in 2016 (Chart 9 and table).

Foreign flows to the stock market are negative.

Foreign flows to the stock market are negative by $490 million in February, driven by $50 million outflows from the spot market and $440 million outflows from the futures market(Chart 10).

Investors maintained their positions in FX derivatives.

Investor positions in FX derivatives were little changed last week. Non-residents, banks and institutional investors hold positions of $11.8 billion, $19.2 billion and $ -4.9 billion, respectively (Charts 11, 12, 13 and 14).


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