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TICS Research Note
Fri, Aug 15 2008, 12:14 GMT
by Joseph Trevisani
When does the weak dollar negatively affect foreign investment in the United States? Looking at the recent record of the Treasury International Capital System from the Department of the Treasury, (TICS, June report, Friday 9:00 ET) it would seem to be never.
Since July 2007 the three months with the highest totals of private investment in the United States have been months that the dollar fell, often dramatically, against the euro. In October 2007, foreigners purchased $96.2 billions in US investments and the dollar fell from 1.4030 to 1.4390. In May 2008 there were $75.5 billions in overseas private inflows while the dollar sank from 1.5290 to 1.5810. And in February this year $66.3 billions entered the US and the euro climbed to 1.5230 from 1.4440.
The same is true for purchases from official government sources. The three months with the highest totals in descending order, January 2008, March 2008 and April 2008, were months when the dollar declined against the euro for all or the majority of the month.
For the world's investors a weak dollar is a good reason to buy in the US, still the world's most productive and stable economy. June was a bad month for the dollar against the euro; it dropped from 1.5300 in the second week to 1.5780 in the last. It will probably be another strong month for investment capital flows into the US economy. American investments purchased with euros in June have appreciated between 3.3% and 6.2% since then on a currency basis alone.
Published on Fri, Aug 15 2008, 12:14 GMT
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