Itaú BBA - Weaker U.S. dollar across the board

FX and Capital Markets

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Weaker U.S. dollar across the board

February 6, 2017

U.S. dollar continues to lose strength against different currencies amid uncertainties about U.S. economic and monetary policy.

(full report attached)

BRL closes the week with 0.5% appreciation.

The U.S. dollar continues to lose strength against different currencies amid uncertainties about U.S. economic and monetary policy. The Brazilian currency appreciated against the greenback, and closed at 3.12 reais per U.S. dollar. With a 0.5% appreciation, the currency underperformed its peers. (Charts 1, 2, 3 and 4).

Central bank completes rollover of contracts expiring in February.

Last week, the monetary authority completed the rollover of contracts expiring in February, and has not yet announced the rollover of contracts due in March. In addition, the BCB also carried out a FX credit line auction totaling $1 billion. The central bank’s short position in FX swaps currently stands at $27 billion (Charts 5 and 6).

Currency outflows between January 23 and January 27.

Last week, there were $1.5 billion financial outflows and $700 million trade inflows. In January, the currency flow was positive by $2.8 billion (Charts 7 and 8).

$750 million in foreign bond issuances last week.

Last week, a Brazilian airline company issued $750 million in foreign bonds. Brazilian corporate bond offerings total $6.7 billion year-to-date (Chart 9 and table).

Foreign inflows to the stock market.

Foreign flows to the stock market were positive by $1.81 billion in January, with $1.9 billion inflows to the spot market and $90 million outflows from the futures market (Chart 10).

Investors change their positions in FX derivatives.

Last week, non-residents reduced their long position in dollar futures by $2.8 billion, and increased their long position in cupom cambial by $1.1 billion. Institutional investors decreased their short position in dollar futures by $3.9 billion. Non-residents, banks and institutional investors hold positions of $11.1 billion, $19.9 billion and $-5 billion, respectively. (Charts 11, 12, 13 and 14).


 



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