Itaú BBA - Volatility rises on Brexit risk

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Volatility rises on Brexit risk

June 20, 2016

Uncertainties related to the UK’s referendum on whether to remain in or leave the EU increased risk aversion

(full report attached)

Global scenario drove emerging market currencies 

Uncertainties related to the United Kingdom’s referendum on whether to remain in or leave the European Union provoked risk aversion in international markets. During the week, the Brazilian real was virtually unchanged and closed at 3.42 per U.S. dollar, outperforming its peers (Charts 1, 2, 3 and 4).

Central bank reduces interventions in the FX market 

The monetary authority did not offer reverse swap contracts last week. Currently, its short position in FX swaps stands at $62 billion (Charts 5 and 6).

Currency outflow in June 

The currency flow remains negative in June, as in recent months. During the second week of the month, $1.1 billion financial outflows outsized $378 million trade inflows. During the month, the flow is negative by $1.7 billion (Charts 7 and 8).

No bond issuance overseas last week

Brazilian companies did not offer debt abroad last week. Issuances overseas total $11.1 billion year-to-date, vs. $8 billion in 2015 (Chart 9 and table).

Foreign flows to the stock market are negative in June

Foreign flows to the stock market are negative in June, as $534 million outflows from the futures market outsized $349 million inflows to the spot market (Chart 10).

Non-residents increased their positions in dollar futures

Non-residents increased their positions in dollar futures by $1.7 billion. Other investor positions were virtually unchanged. Non-residents, banks and institutional investors hold positions of $25 billion, $38 billion and $13 billion, respectively (Charts 11, 12, 13 and 14).


 

 



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