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Emerging market currencies weaken in late September

October 2, 2017

U.S. dollar strengthened and pressured emerging market currencies in late September

(full report attached)
 

U.S. dollar strengthened and pressured emerging market currencies last week

A speech by Federal Reserve Chairwoman Janet Yellen favoring higher interest rates in the U.S. strengthened the dollar early last week, pressuring emerging market currencies. The exchange rate closed the week at 3.16 reais per dollar, depreciating 1.2% and performing in line with its peers (Charts 1, 2, 3 and 4).

Central Bank completed partial rollover of FX swap contracts

The monetary authority maintained the partial rollover of FX swap contracts expiring in October, at a pace of 12,000 contracts per day. All in all, 60% of contracts due in October were rolled over and $4 billion allowed to expire. The Central Bank's stock of FX swaps now stands at $24 billion (Charts 5 and 6).

Currency inflows in September 

After three consecutive months of outflows, the currency flow is positive in September, with $496 million financial inflows and $292 million trade inflows just last week. During the month, the flow is positive by $2.9 billion (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 total $19.7 billion year-to-date vs. $19.2 billion a year ago (Chart 9 and table).   

Foreign flows to the stock market are positive in September

Foreign flows to the stock market are positive by $110 million during the month, as $1.2 billion inflows to the spot market outsized $1.1 billion outflows from the futures market (Chart 10).

Non-residents increased their short position in dollar futures 

Last week, non-residents increased their short position in dollar futures by $2.5 billion and boosted their long position in cupom cambial by $900 million. Other FX derivatives positions were virtually unchanged. Non-residents, banks and institutional investors hold positions of $13.3 billion, $15.3 billion and -$1.8 billion, respectively (Charts 11, 12, 13 and 14).



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