THE TAKEAWAY: U.S. Net Long-Term TIC flows unexpected rose in August > Demand for treasury bonds remains strong amid China and Eurozone concerns > USDJPY bearish
Foreign demand for U.S. financial assets unexpectedly surged in August, as international investors sought stability in safe haven assets amid uncertainty surrounding a Chinese slowdown and ongoing debt woes in Europe. According to the Treasury International Capital (TIC) statement, long-term net purchase of U.S. assets rose to $90.0 billion in August, the most in seven months, from an upwardly revised figure of $67.2 billion the previous month. The median forecast of five economists surveyed by Bloomberg News had projected net buying at $48.0 billion.
Total foreign buying of U.S. securities rose to $91.4 billion in August from $74.0 billion in July, 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. China, the largest owner of U.S. treasury assets, increased its holdings in August, signaling growing dollar optimism and government confidence in the stability of the U.S. dollar. Net purchases by China increased by $4.3 billion to $1.15 trillion.
USDJPY 1-minute Chart: October 16, 2012
Chart created using Market Scope – Prepared by Tzu-Wen Chen
In the minutes following the release of the TIC report, the U.S. dollar tumbled against the Japanese yen, the alternative safe haven currency. At the time this report was written, the USDJPY pair was trading lower at 78.80 yen.
--- Written by Tzu-Wen Chen, DailyFX Research
