Itaú BBA - Exchange rate traded around 3.20 reais per U.S. dollar

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Exchange rate traded around 3.20 reais per U.S. dollar

October 17, 2016

The approval of the PEC 241 improved expectations regarding the fiscal adjustment and boosted the BRL last week.

(full report attached)

BRL strengthened on the week of PEC 241 approval

The Lower House approved in the first round the spending cap Constitutional Amendment (PEC 241) that curbs public spending growth, improving expectations regarding the fiscal adjustment and boosting the Brazilian currency last week. The exchange rate closed the week at 3.20 reais per U.S. dollar, appreciating 0.47%, in line with its peers (Charts 1, 2, 3 and 4).

Central bank maintained the pace of reverse swap auctions

The monetary authority maintained the amounts of reverse FX swap auctions at $250 million, placing offers on a daily basis. Another auction was announced to take place today. Currently, the central bank’s short position in FX swap contracts stands at $31 billion (Charts 5 and 6).

Currency inflows in October 

The currency flow is positive by $534 million in October. Last week, $1.5 billion trade inflows outsized $930 million financial outflows (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 billion year-to-date vs. $8 billion in 2015 (Chart 9 and table).

Foreign flows to the stock market are positive

Foreign flows to the stock market are positive by $376 million in early October, as $699 million inflows to the spot market outsized $323 million outflows from the futures market (Chart 10).

Non-residents reduced their long positions in dollar futures

Non-residents reduced their long positions in dollar futures by $1 billion. Non-residents, banks and institutional investors hold positions of $11 billion, $32 billion and $ -5.9billion, respectively (Charts 11, 12, 13 and 14).


 

 



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