Foreign Purchases of U.S. Assets Slow

Foreign purchases of U.S. stocks and bonds slowed in June and the second quarter, according to new Treasury Department data, suggesting overseas investors’ strong appetite for U.S. assets may be fading.

The Treasury’s monthly report on U.S. transactions with foreigners in long-term securities, issued Friday, showed foreigners bought a net $40.4 billion in U.S. assets in June, down more than 30% from May’s $58.7 billion.

The down trend was most apparent in stock purchases by foreigners, which fell 40%.

The Treasury data showed net foreign purchases of U.S. stocks fell to $10.4 billion in June, from $17.3 billion in May.

“The data suggest that as the probability of a V-shaped recovery in the U.S. has fallen, capital flows into the U.S. are slowing,” said Paul Podolsky, currency strategist at Fleet Capital Markets.

The reduced demand for dollar-denominated assets, after banner inflows in 2000 and early 2001, are consistent with the dollar’s recent slide from 15-year peaks on a trade-weighted basis.

“If this continues, there could be more downward pressure on the dollar,” Podolsky said.