Itaú BBA - Exchange rate trades around 3.50

FX and Capital Markets

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Exchange rate trades around 3.50

May 16, 2016

The BRL weakened 0.9% during the week, slightly outperforming its peers

(full report attached)

Domestic developments brought volatility to the FX market

Early in the week, local political developments caused volatility in the exchange rate. Later in the week, however, global appreciation in the U.S. dollar set the tone for emerging market currencies, and the BRL closed the week at 3.53 reais per dollar. The Brazilian currency weakened 0.9% during the week, slightly outperforming its peers (Charts 1, 2, 3 and 4).

Central bank continues to intervene in the FX market 

The monetary authority sold $3.4 billion in reverse FX swaps last week. In May, the central bank reduced its short position in swaps by $5.9 billion (Charts 5 and 6).

Currency outflows in the first week of May 

After registering inflows in April, the currency flow was negative early in the month ($1.2 billion outflows), as $3.4 billion financial outflows outsized $2.2 billion trade inflows (Charts 7 and 8).

No external bond issuance by Brazilian companies last week

There were no issuances this year. Issuances added up to $8 billion in 2015 (Chart 9 and table).

Foreign flows to the stock market are negative

Foreign flows to the stock market are negative in May, driven by $182 million outflows from the spot market and $313 million outflows from the futures market (Chart 10).

Investors maintained their positions in FX derivatives

Investor positions in FX derivatives were virtually unchanged. Non-residents, banks and institutional investors hold positions of $22 billion, $41 billion and $18 billion, respectively (Charts 11, 12, 13 and 14).


 

 



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