Capital flows to US surge despite dollar weakness

Bangkok Post Thailand

* Published: 18/11/2009 at 01:03 AM (Nov. 17 1:03 PM EDT)

Foreign investment for US bonds and other long term investments, including from China, rose beyond expectations despite concerns over the weakness of the dollar, official data showed Tuesday.

Net long-term capital flows to the United States climbed to 40.7 billion dollars in September from a revised 34.2 billion dollars the prior month, according to the Treasury International Capital Data (TIC) monthly report.

Most economists had expected flows to reach 30.0 billion dollars.

On the whole, foreigners bought 133.5 billion dollars of US securities in September, the most since October 2008, from a revised inflow of 25.3 billion dollars in the previous month.

“This is the fourth consecutive month of positive net TIC flows and good news for the greenback,” said Tu Packard, a senior economist at Moody’s

She said the Treasury data showed financial markets were on the road to recovery from the worst crisis in decades that arose from a home mortgage meltdown.

Although investors are pursuing more risky investments in line with recovery, there remains foreign appetite for US financial assets, Packard said.

Investors usually flock to the US dollar during financial and other troubles but the greenback took a hit in recent months on rising risk appetite and concerns over a ballooning US government budget deficit.

China, in the forefront of criticism on dollar’s weakness, also raised its Treasury bond holdings in September to 798.9 billion dollars from 797.1 billion in August, the Treasury report said.

China, top holder of US debt, has consistently raised concerns about the mushrooming US debt, for fear it could erode the value of the dollar and its Treasury holdings.

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