Foreign ownership of US asset News

Foreign central banks became net sellers of U.S. assets for the first time in 19 months in March, helping to slow foreign capital inflows into the United States by 46%, the Treasury Department said Monday. Net capital inflows fell to $45.7 billion in March from $84.1 billion in February. It was the lowest level of capital inflows since October 2003. (Source Investor Business Daily May 16, 2005)

The China Free Trade Bill, allows for a 180 day negotiation period between the U.S. and China to revalue its currency, if the negotiations are not successful, a temporary across the board tariff of 27.5% will be applied to all Chinese products entering the United States - a penalty that corresponds to their estimated currency advantage. Since economists estimate that China undervalues its currency between 15 percent and 40 percent, according to the Senators, 27.5% represents the midpoint range. (Source May 27, 2005 FinFact)

If China were to relax its 10-year-old dollar peg for the yuan, it would have less incentive to buy Treasury bonds and other U.S. securities. Those purchases, combined with similar efforts by other Asian central banks, financed more than two-thirds of the record trade U.S. deficit last year of $617 billion.

If China and other Asian countries were to slow their purchase ofTreasury bonds, long-term interest rates in the United States could increase at the same time that the Federal Reserve Latest News about Federal Reserve is already pushing up short-term rates. (Source Top Tech News May 18, 2005)

The latest State Street Investor Confidence Index fell 5.5 points, or 6.2 percent, to 83.9. That's the lowest reading since the financial crisis of October 1998, when the Long-Term Capital Management hedge fund imploded. (Source Boston Herald May 25, 2005)