Forex Blog: Currency Trading News & Analysis.

December 16th 2005

US Capital Inflows sets monthly record

When a nation runs a current account or trade deficit, the laws of economics dictate the value of that nation’s currency should depreciate proportionately to make its products and assets relatively cheaper for foreigners to buy. However, as the US twin deficits have exploded over the past few years, the USD has remained stable or appreciated against all major currencies. The explanation seems to be that foreigners are still more than willing to invest in the US and buy US securities, indirectly bridging the gap between domestic savings and investment that form a current account deficit. In October, foreigners purchased a record $106.8 Billion in US securities, which include stocks, bonds, and treasuries. The lesson for currency traders is simple: until foreigners tire of US assets, don’t expect the USD to depreciate.

Read More: Foreign Capital Continues Rush into U.S. Stocks

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© 2004 - 2024 Forex Currency charts © their sources. While we aim to analyze and try to forceast the forex markets, none of what we publish should be taken as personalized investment advice. Forex exchange rates depend on many factors like monetary policy, currency inflation, and geo-political risks that may not be forseen. Forex trading & investing involves a significant risk of loss.