Rising Net Purchase of U.S. Assets in March Reflects Risk Aversion
THE TAKEAWAY: [U.S. Net Long-Term TIC flows rose more than expected in March] > [Increased demand in treasury bonds reflects risk aversion] > [AUDUSD mixed on Greek election announcement]
The U.S. Department of the Treasury released a report today revealing that foreign demand for U.S. financial assets increased more than expected in March. According to the Treasury International Capital (TIC) statement, long-term net purchase of U.S. assets rose to $36.2 billion in March from $10.1 billion in February. The consensus forecast of four economists surveyed by Bloomberg News had called for net buying of $32.5 billion.
Net buying of treasury bonds and notes rose to $20.465 billion in March from $15.350 billion in February, reflecting the flow towards the safety of the U.S. bond market as euro sovereign debt woes and concerns of a softening Chinese economy weighed on market risk sentiment.
AUDUSD 1-minute Chart: May 15, 2012
Chart created using Market Scope – Prepared by Tzu-Wen Chen
The market reaction for the greenback was mixed, overshadowed by the announcement of a second Greek election immediately before the release of the TIC statement. The latest development in Greece carries implications of further instability in the euro zone, which sent investors back to the safety of the U.S. dollar. At the time of this report, the greenback was trading higher against the riskier Australian dollar at $0.9972.
--- Written by Tzu-Wen Chen, DailyFX Research