Itaú BBA - Real trades again below 3.80

FX and Capital Markets

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Real trades again below 3.80

October 13, 2015

Brazilian real followed the external scenario and closed the week at 3.76 reais per U.S.dollar.

(full report attached)

Emerging market currencies appreciated during the week

The Brazilian real followed the external scenario and strengthened during the week, partly reversing the depreciation seen in previous weeks. The exchange rate closed the week at 3.76 reais per U.S. dollar, appreciating 4.51% (Charts 1, 2, 3 and 4).

Central bank reduced interventions in the FX market

Facing lower volatility and a strengthening currency, the monetary authority did not carry out new line auctions or FX swap auctions, but sustained the rollover of swap contracts expiring in November at a pace of 10,275 contracts per day.  If this pace is sustained, contracts will be fully rolled over for a third consecutive month (Charts 5 and 6).

Currency flow is negative

The currency flow was negative in the past week, with $42 million in trade outflows and $2.25 billion in financial outflows. Hence, the flow last week was negative by $2.3 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 are positive in October

Foreign flows to the stock market are positive by $894 million in October, driven by $519 million in inflows to the futures market and $375 million in inflows to the spot market (Chart 10).

Foreign investors reduced their long positions in dollar futures

Foreign investors reduced their long positions in dollar futures by $1.5 billion. There was no significant change in other FX derivatives. The positions of non-residents, banks and institutional investors in FX derivatives stand at $32 billion, $50 billion and $24 billion, respectively (Charts 11, 12, 13 and 14).


 



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