THERE'S ONLY ONE SAFE HARBOR:

US assets still attractive despite dollar fall (Jennifer Hughes in London and Christopher Swann, February 17 2004, Financial Times)

Foreign investors provided a vote of confidence in US asset markets last year by increasing the amount of money they invested in the US even as the dollar fell, according to capital flow data by the US Treasury. [...]

Last year, the dollar fell about 15 per cent on a trade-weighted basis and about 20 per cent against the euro. Strategists suggested the decline, despite the strong inflows, might have been the result of hedging as investors sought to protect themselves against the falling dollar through forward contracts which put further pressure on the US currency even as they bought US assets.

Net flows into US equities rose to a strong $13.3bn in December from $8.8bn the month before compared with an average inflow of $3.1bn over the year. In the bond market, net inflows into the Treasury market slipped to $29.8bn from $33.4bn but remained well above the $22.8bn monthly average. [...]

Michael Woolfolk, currencies strategist at Bank of New York, said the December numbers were "overwhelmingly" positive for the dollar.

"It shows that the decline in US interest rates to four decade lows has not undermined foreign appetite for US securities to the degree thought earlier" he said.

Where else were they going to go to find a completely safe investment?

Posted by Orrin Judd at February 17, 2004 1:46 PM