• Home ::
• Technical ::
• Forex Strategy ::
• FX Commentary

• Send
• Print
• Add To

FX Commentary

2fa86f07-5f4a-4823-8774-dd10934d4424

1

0

USD: February TIC data

Fri, Apr 17 2009, 07:44 GMT
by Kasper Kirkegaard

Danske Bank A/S

Long-term capital flows into the US again

• February’s TIC data showed a larger than expected inflow into long-term securities, and capital is thus once again flowing into the US following a large outflow in January. Foreign investors net bought USD 22bn worth of long-term securities in February compared to net selling of USD 36.8bn in the month prior.
• The latest TIC data shows that the two main causes of the capital outflow in January were reversed in February, as foreign investors stopped selling US agency debt (securities issued by agencies such as Fannie Mae and Freddie Mac) and as US investor demand for foreign securities faded. Foreign investors net bought USD 20.8bn worth of US long term securities, while US investors net sold USD 1.2bn worth of foreign long-term securities.
• While there was an inflow into longer dated securities, the TIC data still shows that there was a USD 97bn outflow from the US when short-term securities, such as stock swaps, are included. However, this is much smaller than the USD 148.9bn outflow in January.
• Interestingly February’s TIC shows that foreign demand returned for agency debt for the first time since September last year and also purchases of US Treasuries increased. While the gradual improvement on the financial markets should imply less need for EM central banks to intervene on the FX market, the pick-up in demand for long-term securities in February was mainly driven by private investors.
• China remains the biggest holder of US Treasuries and increased its holdings by USD 4.6bn to USD 744bn – which, however, is the smallest monthly purchase in a long time. Japan, the second biggest holder, purchased USD 27.1bn worth of Treasuries, while Caribbean based investors (e.g. hedge funds) and Russia each purchased Treasuries worth about USD 10bn.
• Overall, February’s TIC report was quite positive; if demand remains for US securities, while at the same time the US current account continues to improve, we could soon see capital flows begin to bring medium term support to the dollar once again.

• Download full FX Commentary with charts

Published on  Fri, Apr 17 2009, 07:47 GMT