Tuesday, October 16, 2007
first sign of real foreign capital flight
more from ft:
Until now, US policymakers have appeared relatively relaxed about the dollar's decline, since there has been little sign to date that this has been been triggered by a broader global aversion to US assets. However, that attitude could change if signs emerge in the coming months that non-US investors are becoming more nervous about holding dollar assets, as a result of the recent credit squeeze.
foreign holders bailed out of the united states in a huge way in august as dollar devaluation compounded asset deflation. note that august 2007 was the first month of significant net selling of dollar-denominated securities since 1995.
some rebound, as noted by kevin depew, is likely in september -- but this kind of flight from the dollar is deeply unnerving for a financial system that is heavily dependent on foreign credit. it could suggest a material tipping point is near.