Itaú BBA - Sharp volatility in the FX market

FX and Capital Markets

< Back

Sharp volatility in the FX market

December 28, 2015

After weakening against the dollar and topping 4.00, the exchange rate reversed the depreciating trend

(full report attached)

Exchange rate closed the week at 3.94 reais per U.S. dollar

After weakening against the dollar and topping 4.00, the exchange rate reversed the depreciating trend and closed the week at 3.94 reais per U.S. dollar. During the week, the currency appreciated 1.1%, in line with its peers (Charts 1, 2, 3 and 4).

Central bank continues to carry out swap rollovers

The monetary authority maintained the rollover of contracts expiring in January at a pace of 11,260 contracts per day. If this pace is sustained, contracts will be fully rolled over for a fifth consecutive month. The central bank also carried out one FX credit line auction of up to $500 million (Charts 5 and 6).

Currency flow becomes positive again in December

The currency flow is positive by $374 million in December, after a very negative reading early in the month. There were $926 million trade inflows and $836 million financial inflows last week (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 negative month-to-date

Foreign flows to the stock market are negative by $1 billion, with $323 million outflows from the futures market and $751 million outflows from the spot market (Chart 10).

Institutional investors increased their positions in dollar futures

Institutional investors increased their long positions in dollar futures by $3.7 billion. Other positions in FX derivatives were virtually unchanged. Non-residents, banks and institutional investors hold positions of $29 billion, $44 billion and $32 billion, respectively (Charts 11, 12, 13 and 14).


 



< Back