Itaú BBA - Exchange rate ends 2016 at 3.25 reais per U.S. dollar

FX and Capital Markets

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Exchange rate ends 2016 at 3.25 reais per U.S. dollar

January 2, 2017

The exchange rate appreciated during the year and ended 2016 at 3.25 reais per dollar.

(full report attached)

Brazilian currency appreciated 17.8% during the year

Due to changes in the economic outlook, and particularly the advance in fiscal reforms, as well as capital inflows to Brazil in the final weeks of the year, the real appreciated 17.8% against the greenback in 2016. The exchange rate closed the year at 3.25 reais per U.S. dollar. Last week was marked by low liquidity in the FX market and the exchange rate strengthened 0.5%, performing in line with its peers (Charts 1, 2, 3 and 4).

No interventions by the central bank last week 

Last week, the monetary authority did not execute or announce interventions in the FX market. The central bank’s stock of FX swaps now stands at $27 billion(Charts 5 and 6).

Currency inflows in December 19-23

During the week, there were $691 million financial inflows and $6.3 billion trade inflows. In December, the currency flow is positive by $5 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 totaled $19 billion in 2016 vs. $8 billion in 2015 (Chart 9 and table).

Foreign flows to the stock market are negative

Foreign flows to the stock market are negative by $354 million in December, driven by $325 million outflows from the spot market and $29 million outflows from the futures market (Chart 10).

Investors changed their positions in dollar futures

Non-residents reduced their long position in dollar futures by $2.5 billion, while institutional investors increased their short position by $1.2 billion. Non-residents, banks and institutional investors hold positions of $8.1 billion, $25 billion and $ -4.3 billion, respectively (Charts 11, 12, 13 and 14).



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