Wednesday, November 24, 2004

As we all know, private foreign capital is losing interest in dollar-denominated assets.

Treasury notes
2004:I . . . $69.5bn
2004:II . . . $45.1bn
2004:III . . . $23.5bn

Agency bonds
2004:I . . . $42.2bn
2004:II . . . $66.2bn
2004:III . . . $35.1bn

Corporate bonds
2004:I . . . $62.3bn
2004:II . . . $61.2bn
2004:III . . . $95.6bn*

Equities
2004:I . . . $2.3bn
2004:II . . . -$8.1bn
2004:III . . . $3.8bn

Total
2004:I . . . $176.3bn
2004:II . . . $164.4bn
2004:III . . . $158.0bn*

(* - there is some doubt whether the record $43.3bn in coporate bonds purchased in September 2004 by private foreign capital was not at least in part a veiled purchase by foreign central banks through private institutional buyers)
Perhaps it's because everyone seems to be speculating on marked Asian currency revaluation for 2005 (from yesterday's WSJ):
Asia appears to be in the early stages of a regionwide currency revaluation, partly in anticipation that China will let its own currency float higher sometime in the next year.

From Tokyo to Seoul to Singapore, some investors are buying up large volumes of Asian currencies, a strategy that assumes Asian countries will tolerate somewhat stronger currencies in the year ahead. The South Korean won is trading near its highest level against the dollar in seven years, while the Japanese yen is up nearly 7% since the beginning of October.

Investors also are pouring capital into Asia's equity and bond markets -- a bet that appreciating currencies will boost the value of their assets over time.

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