Jamaica Gleaner
Published: Friday | July 17, 2009
Home : Business
Foreign demand for US securities down in May
Demand for long-term United States financial assets by overseas investors plummeted in May as Japan and Russia trimmed their holdings of Treasury securities.

The US Treasury Department said Thursday that foreigners actually sold US$19.8 billion more long-term US securities than they purchased in May.

That compared with net purchases of US$11.5 billion in April.

China, the largest foreign holder of US Treasury securities, bucked that trend. Its holdings rose to US$801.5 billion, an increase of 5.0 per cent from $763.5 billion in April.

China's holdings are a direct result of the huge trade deficits the US runs with the emerging Asian power. The Chinese take the dollars Americans pay for Chinese products and invest them in Treasury securities.

American manufacturers argue that gives China unfair trade advantages by keeping the dollar overvalued against the Chinese currency, which makes US goods more expensive for Chinese consumers and Chinese products cheaper here.

Yuan holds steady

Both the Bush and Obama administrations have argued that China should allow its currency to rise faster in value against the dollar, but the yuan has stopped appreciating against the dollar in recent months.

Japan, the second largest foreign owner of Treasury securities, trimmed its holdings 1.3 per cent to US$677.2 billion in May, from $685.9 billion in April.

Russia cut holdings even more sharply, reducing them 9.1 per cent to US$124.5 billion in May from April.

Oil exporting countries, another large holder of treasuries, boosted their holdings by 1.8 per cent to US$192.9 billion.

US Treasury Secretary Timothy Geithner travelled to Saudi Arabia and the United Arab Emirates this week to assure those governments that the administration is committed to getting its soaring budget deficits under control once the current recession and financial crisis have been contained.

Geithner delivered a similar message to the Chinese in a trip to Beijing a month ago.


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