Bloomberg: Dollar Rises as Foreign Purchases of U.S. Bonds, Stocks Surged to Record

Nov. 16 (Bloomberg) — The dollar rose against the euro and
yen after a Treasury Department report showed foreign investors’
purchases of U.S. financial assets surged to a record in
September.

Investors outside the U.S. bought a net $101.9 billion of
U.S. stocks, bonds and other assets. A widening

yield advantage
for U.S. Treasury securities over European and Japanese debt has
helped spur a 16 percent rally in the dollar against the euro
and yen this year.

A high number today “will present a feel-good effect to
the market and likely incur some dollar buying,” said Michael
Woolfolk, a currency strategist in New York at the Bank of New
York, before the report.

Against the euro, the dollar rose to $1.1675 at 9:03 a.m.
in New York from $1.1718 late yesterday, according to electronic
currency trading system EBS. The dollar rose to 119.40 yen from
118.92 yesterday.

The net purchases in the monthly Treasury International
Capital report were more than the $70 billion median estimate
among economists surveyed by Bloomberg and exceed the record
$66.1 billion U.S. trade deficit for September reported by the
Commerce Department last week.

Foreign investors in August bought a net $89 billion,
revised lower from a previously reported $91.3 billion, the
Treasury Department said.

Investors watch the foreign investment inflows to see if
they are enough to cover the country’s current account deficit,
the broadest measure of trade.

“There’s widespread agreement that we have enough foreign
investment in this country to finance our current account
deficit,” Woolfolk said.

A wider U.S. trade gap means more dollars need to be
converted to other currencies to pay for imports and may raise
concern about the current account. The U.S. currency fell for
three years through December 2004 amid record trade and
government budget deficits combined with the lowest interest
rates in four decades. Low rates diminish the appeal of U.S.
debt securities for international investors.

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