Itaú BBA - U.S. dollar strengthens against emerging-market currencies

FX and Capital Markets

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U.S. dollar strengthens against emerging-market currencies

January 18, 2016

Uncertainties surrounding China drove international markets

(full report attached)

Emerging-market currencies weakened last week

Uncertainties surrounding China drove international markets during a week of underperformance for emerging-market currencies. The Brazilian real depreciated 0.60% and closed the week at 4.05 reais per U.S. dollar (Charts 1, 2, 3 and 4).

Central bank maintained rollover of swap contracts expiring in February

The monetary authority maintained the rollover of contracts due in February at a pace of 11,600 contracts per day. If this pace is sustained, contracts will be fully rolled over for a sixth consecutive month (Charts 5 and 6).

Currency outflows in the beginning of January 

During the first week of the year, there were $1.1 billion currency outflows, as $1.9 billion financial outflows outsized $836 million trade inflows (Charts 7 and 8).

No external bond issuance by Brazilian companies last week

Issuances added up to $8 billion in 2015 (Chart 9 and table).

Foreign flows to the stock market are negative

Foreign flows to the stock market are negative in January, driven by $294 million outflows from the spot market and $84 million inflows to the futures market (Chart 10).

Institutional investors reduced their positions in dollar futures

Institutional investors reduced their long positions in dollar futures by $1.2 billion. Other positions in FX derivatives were virtually unchanged. Non-residents, banks and institutional investors hold positions of $25 billion, $42 billion and $33 billion, respectively (Charts 11, 12, 13 and 14).



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