|
In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.
Data may add to dollar's doldrums
The New York Times
Sunday, January 16, 2005
http://www.nytimes.com/2005/01/16/business/yourmoney/16mark.html
The report last Wednesday that the monthly trade deficit reached $60.3 billion in November surprised forecasters and sent the dollar reeling against other major currencies.
The dollar rebounded at the end of the week, but new data due on Tuesday -- for flows of foreign funds into American stocks and bonds for November -- could undermine it again.
The dollar has weakened in the face of a rising trade deficit because money from abroad must flow into the United States to cover that gap, as well as to cover the broader current account deficit, which also includes services. If that flow slows, the dollar may face more downward pressure.
The most recent data on fund inflows, for October, showed that foreigners bought a net $48.1 billion of stocks and bonds. For the 12 months through October, the net inflow was $853.5 billion, far more than the current account deficit, which is expected to top $600 billion in 2004.
Despite that margin, a slowdown in foreign investment in November is likely to disturb currency traders because they will extrapolate any slowdown into the future. And the $48.1 billion for October was already the smallest monthly net inflow since October 2003 and well below the $67.9 billion monthly average since then.
The problem is bigger than it appears because the numbers published by the Treasury Department in its monthly news release overstate current net inflows. On its Web site, the Treasury advises that these published numbers should be adjusted for stock swaps in mergers between American and foreign companies and for principal payments made on asset-backed securities.
When those adjustments are made, the net inflow for October slips 7.2 percent, to $44.6 billion, and the net inflow over the 12 months through October drops 6.6 percent, to $796.9 billion.
|
