Itaú BBA - Political uncertainties keep the BRL under pressure

FX and Capital Markets

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Political uncertainties keep the BRL under pressure

May 2, 2017

Political noise pressured the Brazilian currency last week.

(full report attached)

Political noise pressured the Brazilian currency last week

Rumors that the Lower House would delay voting on the pension reform and uncertainties regarding the size of protests against fiscal reforms pressured the Brazilian currency last week. The exchange rate closed the week at 3.18 reais per U.S. dollar, weakening 0.9% (Charts 1, 2, 3 and 4).

Central bank finishes rollover of FX swap contracts expiring in May

Last week, the monetary authority finished the full rollover of contracts due in May. The outstanding amount of FX swap contracts now stands at $18 billion (Charts 5 and 6).

Currency inflows in April

The currency flow is strongly positive in April, at $7.4 billion, boosted by trade and financial inflows. In the third week of the month, $891 million trade inflows outsized $500 million financial outflows (Charts 7 and 8).

$700 million in external bonds issued last week

Last week, a mining company raised $700 million abroad, marking the only foreign issuance of the month. Year-to-date, external bond offers add up to $10.7 billion vs. $1.5 billion in the year-earlier period (Chart 9 e table).

Foreign flows to the stock market are positive

Foreign flows to the stock market are positive by $480 million in April, as $524 million inflows to the futures market outsized $44 million outflows from the spot market (Chart 10).

Institutional investors changed their positions in cupom cambial

Last week, institutional investors reduced their short position in cupom cambial by $1.2 billion. Non-residents, banks and institutional investors hold positions of $14.4 billion, $8.2 billion and $ -6.1 billion, respectively (Charts 11, 12, 13 and 14).


 



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