Itaú BBA - External scenario and swap contracts pressure the BRL during the week

FX and Capital Markets

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External scenario and swap contracts pressure the BRL during the week

March 1, 2017

Global risk aversion and the expiration of $4.55 billion in FX swap contracts pressured the BRL late last week.

(full report attached)

Exchange rate depreciated 0.4% during the week 

Global risk aversion and the expiration of $4.55 billion in FX swap contracts pressured the Brazilian currency late last week. The exchange rate closed at 3.11 reais per U.S. dollar, weakening 0.4% and underperforming its peers (Charts 1, 2, 3 and 4).

Central bank completes partial rollover of contracts due in March

Last week, the monetary authority completed the partial rollover of FX swap contracts due in March, allowing expiration of $4.55 billion. Its stock of FX swap contracts now stands at$22 billion (Charts 5 and 6).

Currency outflows in February 13-17

Last week, $1.1 billion financial outflows outsized $418 million trade inflows. In February, the currency flow is negative by $3.1 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 $7.7 billion year-to-date (Chart 9 and table).   

Foreign flows to the stock market are negative

Foreign flows to the stock market are negative by $79 million in February, driven by $409 million inflows to the spot market and $488 million outflows from the futures market (Chart 10).

Institutional investors changed their positions in FX derivatives

Last week, institutional investors increased their short position in dollar futures by $1.5 billion and reduced their short position in cupom cambial by $1.3 billion.  Non-residents, banks and institutional investors hold positions of $9.4 billion, $22.1 billion and $ -5.2 billion, respectively (Charts 11, 12, 13 and 14).


 



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