Itaú BBA - Respite for the real last week

FX and Capital Markets

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Respite for the real last week

October 5, 2015

The Brazilian real appreciated slightly during the past week.

(full report attached)

The exchange rate appreciated slightly during the week

The exchange rate weakened in the beginning of the week, but due to a better domestic outlook and signs of a slowdown in the U.S. economy, the currency rebounded and ended the week at 3.93 reais against the dollar. During the week, the Brazilian real strengthened 1.1%, performing in line with its peers (Charts 1, 2, 3 and 4).

Central bank continued to intervene in the FX market

During the last week, the monetary authority carried out one FX swap auction (totaling $1 billion) and one line auction (also $1 billion). The central bank started the rollover of swaps 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 slightly negative

The currency flow was negative last week, with $94 million in trade outflows and $461 million in financial outflows. Hence, the flow in September is negative by $172 million (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 September

Foreign flows to the stock market were negative by $347 million in September, with $239 million in outflows from the futures market and $108 million in outflows from the spot market (Chart 10).

Institutional and non-resident investors changed their positions in dollar futures in the past week

Institutional investors reduced their short positions in dollar futures, while foreign investors increased their long positions. Foreigners also expanded their long positions in cupom cambial. There were no relevant changes in other FX derivatives. The positions of non-residents, banks and institutional investors in FX derivatives stand at $33 billion, $48 billion and $24 billion, respectively (Charts 11, 12, 13 and 14).


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