Itaú BBA - Exchange rate still hovering near 3.10

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Exchange rate still hovering near 3.10

April 3, 2017

Exchange rate ended 1Q17 at 3.12 reais per U.S. dollar

(full report attached)

Exchange rate ended 1Q17 at 3.12 reais per U.S. dollar

In the last week of the first quarter, the exchange rate closed at 3.12 reais per dollar, pressured by the expiration of $4.2 billion in FX swap contracts. The Brazilian currency weakened 0.45% from one week earlier and underperformed its peers (Charts 1, 2, 3 and 4).

Central bank completed the rollover of FX swap contracts due in April

Last week, the monetary authority completed the rollover of FX swap contracts due in April, allowing $4.2 billion to expire. The outstanding amount of FX swaps now stands at $18 billion. The central bank also sold $550 million out of $2 billion offered in FX credit line auctions on Friday (Charts 5 and 6).

Currency outflows on March 20-24

Between March 20 and 24, $2.5 billion financial outflows outsized $2 billion trade inflows. In March, the currency flow is positive by $3 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 $2.25 billion in March and $10 billion year-to-date (Chart 9 and table).   

Foreign flows to the stock market are negative

Foreign flows to the stock market arenegative by $1.42 billion in March, driven by $1 billion outflows from the spot market and $425 million outflows from the futures market (Chart 10).

Investors changed their positions in FX derivatives

Last week, non-residents reduced their long positions in dollar futures by $2 billion. Institutional investors increased their short positions in dollar futures by $1.4 billion and reduced their short positions in cupom cambial by $1 billion. Non-residents, banks and institutional investors hold positions of $8.6 billion, $17 billion and $ -5.4 billion, respectively (Charts 11, 12, 13 and 14).



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