Itaú BBA - Political uncertainty keeps the BRL under pressure

FX and Capital Markets

< Back

Political uncertainty keeps the BRL under pressure

May 29, 2017

Political uncertainty in the domestic scenario continues to pressure the BRL, which ended the week at 3.26 reais per dollar.

(full report attached)

The exchange rate traded close to stability  

The scenario of political uncertainties continued to pressure the exchange rate. The currency closed the week at 3.26 reais per U.S. dollar, depreciating 0.18% from one week earlier and performing in line with its peers (Charts 1, 2, 3 and 4).

Central bank continues to roll over FX swap contracts expiring in June

Last week, the monetary authority continued to roll over FX swap contracts expiring in June, at a pace of 8,000 contracts per day, and announced that another auction will take place today. Its stock of FX swap contracts now stands at $28 billion (Charts 5 and 6).

Currency inflows in May 

On May 15-19, the currency flow was virtually zero, as $2.104 billion financial outflows nearly erased $2.088 billion trade inflows. During the month, however, the flow is positive by $486 million (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 $15.7 billionyear-to-date vs. $9 billion one year earlier (Chart 9 and table).   

Hefty foreign flows to the stock market 

Foreign flows to the stock market are positive by $2.14 billion as of May 24, driven by $740 million inflows to the spot market and $1.4 billion inflows to the futures market (Chart 10).

Investors changed their positions in FX derivatives

Last week, non-residents increased their long position in dollar futures by $2.6 billion. Institutional investors reduced their short position in dollar futures by $1.1 billion, while boosting their long position in FX swap contracts by $5.6 billion. Non-residents, banks and institutional investors hold positions of$12.8 billion, $10.1 billion and $3 billion, respectively (Charts 11, 12, 13 and 14).


 



< Back