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Asian giants seen keeping US trove despite dollar plunge

TOKYO, March 23, 2008 (AFP) - With the dollar plunging and the Federal Reserve slashing interest rates, markets are on alert for any signs that foreign investors, particularly in Asia, are buying fewer US assets.
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But while some private investors may be heading for the exit, analysts say the authorities in Japan and China look set to hold their nerve as the value of their vast dollar reserves declines.
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The world's largest economy has long relied on foreign purchases of Treasuries (US government bonds) to finance its huge debt.

With the yield on those bonds now falling as the Fed tries to contain the credit crisis, higher return assets in other countries have become more attractive.

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The Fed has now slashed its federal funds rate by 300 basis points from 5.25 percent last September, while the dollar has hit a series of record lows against the euro and a 12-year trough versus the yen.

"Foreign investors bought 80 to 90 percent of total US Treasuries last year," said Akihiro Nishida, senior economist at Mitsubishi UFJ Securities. "When the dollar goes down, investors certainly have an incentive to sell.
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While the sale of US assets by individual investors could put extra pressure on the ailing

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