Itaú BBA - Foreign Currency Outflows Reach $7.1 Billion in December

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Foreign Currency Outflows Reach $7.1 Billion in December

December 29, 2014

Foreign Currency Outflows Reach $7.1 Billion in December

(full report attached)

A week of slow moves in the global FX market

In a week marked by holidays, low liquidity and few events, the Brazilian real and its peer currencies weakened on Tuesday following the upward revision in the U.S. GDP growth in the third quarter. The exchange rate closed the week at 2.67 reais per dollar, slightly depreciating 0.4% from the previous week’s closing price (Charts 1, 2, 3 and 4).

The central bank continued to roll over swap contracts and to offer FX credit line auctions

The monetary authority continued to roll over contracts expiring in January at a pace of 10,000 contracts per day. If the same pace is sustained until the end of the month, the central bank will roll over virtually the entire batch maturing in January. Additionally, the monetary authority carried out line auctions amounting to $2 billion last week (Charts 5 and 6).

Financial and trade outflows in the past week

The contracted currency flow was again negative in the third week of December, with net outflows of $3.9 billion from the financial account and $710 million from the trade account. Outflows in December add up to $7.1 billion (Charts 7 and 8).

No new bond issuance overseas 

No new issuance was announced last week (Chart 9 and table).

Foreign flows to the stock market remain negative in December 

Flows to the stock market are negative by $1.3 billion in December, with outflows from both the futures and spot markets (Chart 10).

Non-residents reduced their long positions in FX derivatives last week

Non-residents reduced their positions in FX derivatives (dollar futures, cupom cambial and swaps) to $28 billion, while banks and institutional investors increased their positions to $46.5 billion and $50.7 billion, respectively (Charts 11 and 12).

Outflows from funds dedicated to Brazil continued for another week  

For a sixth consecutive week there were outflows from funds dedicated to Brazil, albeit less intensely than in the previous week. During the week ended on December 24, equity funds and fixed income funds experienced net outflows of $317 million and $169 million, respectively (Charts 13 and 14).

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