Itaú BBA - Real closed the week at its lowest level

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Real closed the week at its lowest level

September 8, 2015

The Brazilian currency weakened throughout the whole week due to the deterioration in the fiscal outlook.

(full report attached)

Real underperforms its peers 

The Brazilian currency weakened throughout the whole week due to domestic uncertainties caused by deterioration in the fiscal outlook. The exchange rate closed the week at 3.84 reais per U.S. dollar, depreciating 6.81% and underperforming its peers (Charts 1, 2, 3 and 4).

Central bank began rollover of FX swap contracts expiring in October and announced another line auction

The monetary authority began to roll over 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 announced a line auction of $3 billion to be carried out today (Charts 5 and 6).

Currency flow was positive in the fourth week of August

The currency flow was positive in the fourth week of August, with $572 million in trade inflows and $239 million in financial inflows. Hence, the flow in the month is positive by $2.6 billion (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 were negative in August, but are positive in September

Foreign flows to the stock market are positive by $211 million in September, with $327 million in inflows to the futures market and $116 million in outflows from the spot market (Chart 10).

Non-resident and institutional investors reduced their long positions in FX derivatives last week

Institutional and non-resident investors reduced their long positions in FX derivatives to $22 billion and $31.6 billion, respectively. Meanwhile, banks increased their long positions to $44.8 billion (Charts 11, 12, 13 and 14).


 

 



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