Itaú BBA - Real closed the week at 3.87 after S&P downgrade

FX and Capital Markets

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Real closed the week at 3.87 after S&P downgrade

September 14, 2015

The Brazilian Real weakened after losing investment grade by S&P and closed the week at 3.87 reais per U.S. dollar.

(full report attached)

Exchange rate depreciated 1.8% on the day after the loss of the investment grade

The currency weakened after the downgrade by S&P and closed the week at 3.87 reais per U.S. dollar. The Brazilian real depreciated 0.7% during the week, underperforming its peers (Charts 1, 2, 3 and 4).

Central bank continued to roll over FX swap contracts expiring in October, and carried out two more line auctions

The monetary authority maintained the rollover of contracts expiring in October at a pace of 9,450 contracts per day. If this pace is sustained until the end of the month, 100% of the total batch will be rolled over for a second consecutive month. The central bank also carried out two line auctions: one on Tuesday, Sept. 8, of up to $3 billion, and one on Thursday, Sept. 10, of up to $1.5 billion (Charts 5 and 6).

Currency flow was positive for another week

The currency flow was positive in the past week, with $ 1.1 billion in trade inflows and $ 709 million in financial inflows. Hence, the flow in September is positive by $343 million. The August flow was also positive (Charts 7 and 8).

No external bond issuance last week

No bonds were issued by Brazilian companies overseas. Year-to-date, issuances add up to $8 billion (Chart 9 and table).

Foreign flows to the stock market are slightly negative

Foreign flows to the stock market are negative by $47 million in September, with $288 million in inflows to the futures market and $335 million in outflows from the spot market (Chart 10).

Institutional investors, non-residents and banks maintained their long positions in FX derivatives virtually unchanged last week

Non-residents, banks and institutional investors hold positions of $32 billion, $44 billion and $22 billion, respectively (Charts 11, 12, 13 and 14).



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