Itaú BBA - Domestic and external factors pressured the BRL

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Domestic and external factors pressured the BRL

April 24, 2017

Risk aversion driven by the French elections and concerns regarding the pension reform bill in Congress pressured the BRL

(full report attached)

Brazilian currency weakened on domestic and global uncertainties

Risk aversion driven by uncertainties surrounding the French elections pressured the FX market last week. In Brazil, those uncertainties piled up on concerns regarding the pension reform bill in Congress. The Brazilian currency depreciated 0.10% and closed the week at 3.15 reais per U.S. dollar (Charts 1, 2, 3 and 4).

Central bank maintained full rollover of FX swap contracts due in May

Last week, the monetary authority maintained the rollover of contracts due in May, at a pace of 16,000 contracts per day. If this pace is sustained until the end of the month, the central bank will fully roll over contracts expiring in May. Its outstanding amount of FX swap contracts now stands at $18 billion (Charts 5 and 6).

Currency inflows in April

The currency flow is strongly positive in April, at $7 billion, boosted by trade and financial inflows. In the second week of the month, there were $3.0 billion financial inflows and $1.1 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 $269 million in April, as $358 million inflows to the futures market outsized $89 million outflows from the spot market (Chart 10).

Non-residents’ position in FX derivatives remained unchanged

Last week, positions in FX derivatives remained virtually unchanged. Non-residents, banks and institutional investors hold positions of $13.0 billion, $11.3 billion and $ -7.9 billion, respectively (Charts 11, 12, 13 and 14).


 



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