Foreigners continue to purchase US assets

One of the most fundamental principles of macroeconomics dictates a nation’s currency should depreciate when its current account balance is negative, in order to induce foreigners to buy its products and services. What happens when foreigners substitute their purchase of goods and services for stocks and bonds? This is precisely the question that economists and currency traders have been asking themselves for years, as the US current account deficit has ballooned while foreigners continued to purchase American assets. According to the most recent data, foreigners are on pace to buy nearly $1 trillion of American debt and equity this year. This number has remained fairly constant and suggests the USD will remain buoyant until demand for US assets declines.

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