DJ. US Dollar Under Pressure As Net Portfolio Inflows Slow
By Jamie McGeever
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--Portfolio flows data this week show that capital
continues to flow into the U.S. and out of the euro zone, but it's the dollar,
and not the euro, which is weakening.
That's because the U.S. needs to attract around $33 billion a month in
foreign capital to fund its current account deficit and the $15.6 billion net
foreign purchases of U.S portfolio assets in February were clearly not enough.
The dollar is, therefore, feeling the pinch.
"The data provide continued evidence that foreign appetite for U.S. paper is
waning and that, consequently, financing the current account deficit is
becoming more problematic, with attendant negative implications for the U.S.
dollar," wrote Paul Meggyesi, currency economist at Deutsche bank, in a note
Wednesday.
Foreigners bought a net $7.25 billion of U.S. corporate bonds, $6.23 billion
of agency bonds and $2.1 billion of equities but they sold a net $169 million
of Treasuries in February, the U.S. Treasury reported Tuesday.
Broken down, the data is even more worrying for dollar bulls.
Net equity inflows from foreign investors were down from $8.6 billion in
January, well below the 2001 monthly average of $11.6 billion, according to
Deutsche's Meggyesi.
And corporate bond inflows from foreign investors - which totaled a net
$221.86 billion last year and were crucial to underpinning the dollar - are
slipping fast.
Meanwhile, similar data released by the European Central Bank Monday revealed
another sizable capital outflow from the euro zone in February.
On top of a net EUR9.9 billion net direct investment outflow, a net EUR9.9
billion flowed out of the euro-zone's portfolio account, the ECB said. |
