Surging US Capital inflows data rescues the greenback

The greenback made major inroads against the international currencies, bolstered by a second highest on record figure of net foreign purchases of US assets.
The data indicated net capital inflows of $91.5 billion in January, substantially higher than the trade deficit figure of $58.3 billion – an indication to substantiate the fact that US attracts more investments than its trade deficit.

Euro plunged below the 1.33 mark following the capital inflows data after briefly touching the 1.34 mark initiated by a 6-month peak in Germany’s ZEW survey reading.
Cable too felt the heat and drifted towards the 1.9125 levels following the robust US data release, inching towards the crucial support of 1.91 mark.
Notwithstanding the overall rise in capital inflows, Japanese purchases (who are the largest holders of US treasuries) of US assets reduced 1.4% – pointing a 4th decline in the past 5 months – sending doubting signals to the currency markets and suggesting that the Japanese are indeed diversifying their reserve assets.
The Yen held around the 104.50 mark in early Tokyo trade.
Separately, the comments from Saudi Arabia’s oil minister stating that he would press for supply increase had a short lived cooling effect on the oil prices, which regained the $55 per barrel mark.

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