US net overall capital inflows surge in September

Net overall capital inflows into the United States jumped to $133.5 billion in September from a revised inflow of $25.3 billion in the previous month.

Excluding swaps, net long-term capital inflows rose to $40.7 billion from a revised $34.2 billion inflow in the previous month. This is a key gauge of foreign investor appetite because they exclude short-term transactions.

Foreign investors’ holdings of dollar-denominated short-term U.S. securities declined $11.8 billion while overseas investments in Treasury bills dropped $0.3 billion.

Analysts said the inflows number showed the resilience in demand for U.S. securities despite concerns about the dollar’s outlook and the large issuance of U.S. debt.

“Foreigners continue to be net buyers of U.S. dollars in size indicating they are unfazed by dollar weakness in September,” said Kathy Lien, director of research at GFT Forex in New York.

“The demand for long term over short term securities suggests that investors have grown more confident in the U.S. recovery and the financial markets,” she added.

The dollar showed little reaction to the capital inflows data. The euro was last at $1.4870 , down 0.7 percent on the day, while the dollar gained 0.2 percent to 89.25 yen .

The greenback fell 1.9 percent against a major currency basket in September .DXY>.

Despite its concern about the U.S. dollar, China, the largest holder of U.S. Treasury securities, marginally increased its its holdings of U.S. government bonds to $798.9 billion in September. In August, it held $797.1 billion.

Japan also boosted its Treasury investments to $751.5 billion from $731.2 billion while Russia’s holdings of U.S. government bonds was at $121.8 billion, up slightly from $121.6 billion in August.

But oil exporters and Caribbean banking centers decreased their Treasury holdings during the month.

Overall, foreign private investors bought a net $148.1 billion of U.S. assets in September, up sharply from $29.9 billion in the previous month.

In contrast, official buyers, which include foreign central banks, sold $14.6 billion of U.S. assets in September, compared with an outflow of $4.7 billion in August.

The department also said foreigner investors increased their purchases of U.S. equities to $15.7 billion and boosted their buying of Treasury bonds and notes to $44.7 billion.

However, they sold $2.9 billion of corporate bonds, less than the $6.6 billion in the prior month.

“Private purchases of Treasury bonds strengthened again and there’s less and less off-loading of corporate bonds,” said Pierre Ellis, senior economist at Decision Economics in New York. “So it looks like a gradual healing in foreign perceptions of the attractiveness of U.S. securities.”