Itaú BBA - Real Sustains Upward Trend

FX and Capital Markets

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Real Sustains Upward Trend

April 13, 2015

The exchange rate held the upward trend of the previous week, although Fitch Ratings revised the outlook on Brazil’s sovereign debt to negative from stable.

(full report attached)

Brazilian currency kept the good performance of the previous week.

The exchange rate held the upward trend of the previous week, although Fitch Ratings revised the outlook on Brazil’s sovereign debt to negative from stable. The exchange rate ended the week at 3.075 reais per U.S. dollar, strengthening 1.5% from the previous week’s closing price, in line with its peers (Charts 1, 2, 3 and 4).

Central bank continued acting in the same way in the foreign exchange market.

The monetary authority continued to roll over the $10.1 billion expiring in May at a pace of 10,600 contracts per day. Full rollover ensures that the FX swap stock remains constant at $113 billion (Charts 5 and 6).

Currency flow was positive in March.

The currency flow was positive by $2 billion in March. There were $2.1 billion in financial inflows, while the trade flow was close to zero. In the early days of April, the currency flow is negative by $807 million (Charts 7 and 8).

No new bond issuance overseas in the past week.

Another week passed without any bond issuances in the external market. So far, issuances add up to $400 million year-to-date (Chart 9 and table).

Foreign flows to the stock market were positive in March and remain positive in April.

Foreign flows to the stock market ended March in positive territory and remain positive in April, by $1.3 billion, with inflows to both the futures and spot markets (Chart 10).

Foreign investors reduced their long FX derivatives positions, while institutional investors increased theirs.

During the past week, non-residents reduced their long FX derivatives positions, particularly dollar futures, to $38 billion. Meanwhile, institutional investors increased their positions to $28.2 billion (Charts 11, 12, 13 and 14).



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