US Net Foreign Security Purchases Plummet
Mon Sep 18 13:07:00 GMT 2006
Net Foreign Security Purchases plummeted in July, as investors abroad slashed investments in US Dollar-denominated assets. The most dramatic decline occurred in Government Bonds. Net foreign purchases of Treasury bonds and notes fell from 27.0B in June to 6.6B in July. Further exacerbating the drop, international traders cut US Corporate Stocks holdings from $555.0B to $468.1 in the same period. Though US equity desks likewise cut investments in foreign stock markets, it was not enough to stem the net balance decline. The number paints a very poor picture for net foreign security purchases going forward, and the current figure falls far short of covering the simultaneous US trade deficit. If international investor confidence has indeed fallen significantly, we could see further drops in the US dollar moving forward.
Foreign exchange reactions to the figure were much stronger than for the poor Current Account Balance figure this morning. The EURUSD immediately added nearly 30 points in the 5 minutes following the news report.