Weak Dollar Bodes Well for U.S. Economy

When does the weak dollar negatively affect foreign investment in the United States?  Looking at the recent record of the Treasury International Capital System from the Department of the Treasury, (TICS, June report, Friday 9:00 ET) it would seem to be never.

Since July 2007 the three months with the highest totals of private investment in the United States have been months that the dollar fell, often dramatically, against the euro. In October 2007, foreigners purchased $96.2 billions in US investments and the dollar fell from 1.4030 to 1.4390. In May 2008 there were $75.5 billions in overseas private inflows while the dollar sank from 1.5290 to 1.5810. And in February this year $66.3 billions entered the US and the euro climbed to 1.5230 from 1.4440.

The same is true for purchases from official government sources.  The three months with the highest totals in descending order, January 2008, March 2008 and April 2008, were months when the dollar declined against the euro for all or the majority of the month.

For the world’s investors, a weak dollar is a good reason to buy in the US, still the world’s most productive and stable economy.

June was a bad month for the dollar against the euro; it dropped from 1.5300 in the second week to 1.5780 in the last. It will probably be another strong month for investment capital flows into the US economy.

American investments purchased with euros in June have appreciated between 3.3% and 6.2% since then on a currency basis alone.

Comments

[User 244491:]

Put your money where your mouth is,don't teach real life investors how to make money,statistical economics have to do with markets what you have to do on Mars.
Dow Jones is going soon to below 10000 then immediately sits at 9000 then stays in the dangerous zone till December as mutual funds will start to sell to pikers fantastic valuations reports and all media channels will deliver it to investors on a timely basis as fund managers have their yearly bonuses and job at stake,when investors finally will jump the ship,this combined with unloading Dow Jones,SP500,NASDAQ holdings by funds that bought it at 9000 to unload it to investors and when their wish will not materialize as investors will flee the sunking ship,Dow Jones can start to move to it's important support at 7000-7500 in the first quarter of 2009.And this target will be reached as algorythmic trades will enter the sell side immediately and start to hedge their unhedge positions,this will increas volatility VIX,XO,VXD to levels higher that previous highs and we will reach the target at 7500 for DJIA.Then everybody wil cover his short positions and that will bring DJIA to 8500 probably but it will not change the bear market from testing some new deeper lows.
I may be wrong in my opinion only in one case,if DJIA will fall in one day 2000-3000 then God save America.
Don't trust nobody as bear knows no fear,trust your killer insticts only.

2008 Aug 17 06:08 AM

[EX-republican:]

SInce July 07 foreigners have bought the company I work for and the company that makes the beer I consume after work. This on top of already owning the company that makes the car I drive, my motorcycles, television, sterio and lawnmower. I'm sure this investment will help the stock markets, but I think the first rule of ecomonics should be ownership; being a buyer rather than a seller, owner rather than a renter.

2008 Aug 17 10:41 AM

[Balderdash:]

<< Since July 2007 the three months with the highest totals of private investment in the United States have been months that the dollar fell, often dramatically, against the euro.>>

then you say

<< June was a bad month for the dollar against the euro; it dropped from 1.5300 in the second week to 1.5780 in the last. It will probably be another strong month for investment capital flows into the US economy.>>

I've never seen someone contradict themselves so badly with so few words written.

2008 Aug 17 11:51 AM

[Matt from Q...:]

Joe, in case you haven't noticed the dollar has been depreciating severely as the economy has weakened and the stock markets tanked. A weak dollar is not good for the economy-it's a symptom that something is very wrong with the economy.

I understand that a weaker dollar is good for exports and that it's good for foreigners who wish to buy U.S. assets, but Americans absolutely hate to see U.S. assets sold to foreigners.

2008 Aug 17 12:03 PM

[tecumseh:]

An inordinately weak dollar, weak politicians and weak regulatory environment have allowed foreign ownership of our water supply (e.g., American Water), our toll roads (e.g., Indiana) and entire industries and their jobs (e.g., textile). Hardly a prescription for a secure nation nor a sound economy.

2008 Aug 17 01:01 PM

[MacroEconomist:]

Pure drivel...

2008 Aug 17 01:11 PM

[Steven Hansen:]

Ya, instead of selling the assets to foreigners, we can sell them to the enron executives or have one of those white knight conglomerates come in and carve up the company.

Wake up and realize that jobs are important, and the nationality of the owner is not.

2008 Aug 17 09:39 PM