Itaú BBA - Weaker U.S. labor market boosts the BRL

FX and Capital Markets

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Weaker U.S. labor market boosts the BRL

June 5, 2017

Non-residents, banks and institutional investors hold positions of $13.8 billion, $9.9 billion and $2.8 billion, respectively

(full report attached)

Brazilian currency rebounds 

Weaker figures on the U.S. labor market undermined the dollar against many currencies, including the Brazilian real. The exchange rate closed at 3.25 reais per dollar on Friday, depreciating 0.45% from a week earlier and performing in line with its peers (Charts 1, 2, 3 and 4).

Central bank finishes the rollover of FX swap contracts expiring in June

Last week, the monetary authority completed the full rollover of FX swap contracts expiring in June, at a pace of 8,000 contracts per day. Its stock of FX swaps now stands at $28 billion (Charts 5 and 6).

Currency inflows last week 

On May 22-26, the currency flow was positive, as $1.342 billion trade inflows outsized $1.064 billion financial outflows. In May, the flow is positive by $765 million (Charts 7 and 8).

No external bond issuances last week 

There were no bond issuances abroad by Brazilian companies last week. Brazilian corporate bond offerings totaled $5 billion in May and $15.7 billion year-to-date vs. $9 billion one year earlier (Chart 9 and table).   

Foreign flows to the stock market were positive in May

Foreign flows to the stock market were positive in May, at $1.9 billion, driven by $0.7 billion inflows to the spot market and $1.2 billion inflows to the futures market (Chart 10).

Investors switched their positions in dollar futures

Last week, non-residents and institutional investors switched their positions in dollar futures. Non-residents are now short this derivative after reducing their long position by $7.1 billion. Institutional investors, who were previously short, reduced their position by $4.2 billion and are now long dollar futures. Meanwhile, non-residents increased their long position in cupom cambial by $8.1 billion and institutional investors expanded their short position in this derivative by $5.1 billion. Non-residents, banks and institutional investors hold positions of $13.8 billion, $9.9 billion and $2.8 billion, respectively (Charts 11, 12, 13 and 14).


 



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