Forex Investment and Currency Trading

The US attracted inflows worth US$ 72.5bn in February according to the TIC data, up from US$ 57.1bn the previous month.  The increase reflects notable repatriation of US holdings of foreign bonds.  Foreign appetite for US assets changed little on the month (up 5.5bn).  While the February inflows were above the 12 month average, they were not able to halt the Dollar decline which recorded a further leg down at the end of February.  Anecdotes for March and April so far suggest that the US flow position has deteriorated largely due to US buying of foreign equity.

Details:

US investor appetite for foreign bonds turned from strong net buying to small net selling.  US demand for foreign stocks picked up notably after 4 months of close to balanced activity as expected.  Foreign investors bought a small amount of US equity, thus the TIC data showed a small net equity outflow from the US to the rest of the world for the first time since last September.

Foreign investors remained net buyers of US fixed income products and equities. Demand (mainly private) for Agency bonds picked up notably to well above the 12 month average.  Buying from Asia – notably Japan, Malaysia, Korea and China - and the UK was a key driver behind the pick up.

Demand for corporate bonds also increased (to 19.3bn) after a very muted inflow in January, but it remained well below its 12 month average. Demand for US corporate bonds was particularly strong from the Caribbean. Recent issuance trends, especially for April, suggest that some further improvement in inflows may be in the pipeline.

Foreign demand for USTs was roughly equal to the 12 month average. The UK recorded strong net buying of USTs, whereas Asia recorded strong net selling. The data records that official institutions sold USTs.