NewsMine — economy — united-states — 2003 — 2003-sept-oct — Viewing Item

Asian debt withdrawal threat to us deficit { September 7 2003 } Original Source Link: (May no longer be active)    http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1059479617509&p=1012571727085 http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1059479617509&p=1012571727085 Asian debt withdrawal threat to US deficit By Jenny Wiggins in New York Published: September 7 2003 19:01 | Last Updated: September 7 2003 19:01 Economists fear that Asian investors, who are the largest foreign owners of US Treasuries, may cut their holdings of US government debt, withdrawing a key source of financing for America's large current account deficit. The worries have been fuelled by recent sharp falls in the price of US government debt. Weakness in the US Treasury market could make Asian investors "less willing" buyers of debt securities, said Marcel Kasumovich, head of G10 foreign exchange strategy at Merrill Lynch. He said there had already been a "noticeable shift" downwards in the amount of debt issued by mortgage financiers Freddie Mac and Fannie Mae being bought by foreign investors. Asian investors have piled into the US Treasury markets in recent years, helping to push Treasury prices high and interest rates low. China, Japan, South Korea and Hong Kong owned a combined total of about $696bn in Treasuries at the end of June, up from $512bn in December 2001, according to data from the US Treasury. Asian countries use the income they receive from exporting goods to the US to buy American assets, which helps keep their currencies weak compared with the dollar. This helps keep the price of Asian goods down in the US. But in recent months, as investors have become more optimistic about an economic recovery, they have begun to sell Treasury debt, sending government bond prices down. Political pressure on Asian governments to alter their exchange rates could also prompt selling. The US Treasury would like Beijing to abandon its fixed currency regime because it is concerned that China is keeping its currency low to support exports. However, if China and other Asian countries were to allow their currencies to strengthen against the US dollar, they would have less need to own US assets. "It could mean Asia pulls out of US markets," said Ethan Harris, chief US economist at Lehman Brothers. If Asian countries were to reduce their holdings of American assets heavily, they would remove a key source of finance for US investment spending.

2 years in a row more in poverty Asian debt withdrawal threat to us deficit { September 7 2003 } Asian unpegging crucify us { October 3 2003 } Bush bid weaken dollar against asia { September 24 2003 } Bush cuts schools highways { September 10 2003 } Bush priorities under scrutiny Bush takes credit economic upturn { September 1 2003 } China brings us export resictions into trade debate Deficit not manageable { September 18 2003 } Deflation still worries federal reserve { September 17 2003 } Deflation will continue for years { September 10 2003 } Disappointed earnings bonds rally Dollar gains on euro { September 2 2003 } Dollar over valued { September 18 2003 } Dollar plunges 3 year low Dollar tumbles low against euro { October 8 2003 } Economy expands fastest since 1984 no jobs { October 31 2003 } Fed holds rates warns on deflation Firms dont buy rebound Firms still slashing jobs Foreign investors fear weak dollar { September 22 2003 } Gold hits 7 year high { September 25 2003 } Gold records as tumbling dollar { September 10 2003 } Government claims unemployment stabilizing { October 3 2003 } Grocery workers 3rd day strike san diego { October 14 2003 } Job loss like great depression Jobless claims lowest eight months { October 9 2003 } La transit strike may strand 500 thousand { October 14 2003 } Mass august layoffs { September 26 2003 } Monthly costs iraq approach vietnam Poor gained 1 3m in 2002 { September 3 2003 } States risk big losses bond funding pensions { October 12 2003 } Stocks at 14 month high { September 2 2003 } Stocks fall economy worries { September 30 2003 } Stocks lower after production data Stocks rebound hopes intact { October 1 2003 } Stocks rise on upbeat analyst reports { September 8 2003 } Stocks slip bonds rise Trade gap bring down dollar warns imf { September 19 2003 } Trade gap could bring down dollar { September 19 2003 } Uninsured increases 2 4 million last year { September 30 2003 } Us bonds face gloomier future as selling continues { September 7 2003 } Us closes last levis manufacturer { September 26 2003 } Us losing millions manufacturing jobs { September 4 2003 } Weak dollar raises stocks Files Listed: 45

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