The US Dollar falls in early US trading, affected mostly by the decline in TIC flows for net foreign purchases, from 27.2 billion down to 24 billion. There was an expectation for an increase to 57.7 billion.
TIC stands for Treasury International Capital and the TIC flow data released on a monthly basis by the Department of Treasury indicate the balance of domestic and foreign investment, basically the difference in value between foreign long-term securities purchased by US citizens and US long-term securities purchased by foreigners during the reported period.
Demand for domestic securities affect the demand and value of a currency because the two are directly linked. The reason is because foreigners must buy the domestic currency to purchase the nation’s securities. Therefore a decrease in the TIC flow does not have a good effect on the currency, in this case the Us Dollar.
Large players such as China and Caribbean Banking Centers (CBC) decreased their holdings from February to March, the former by $9.2 billion and the latter by $14.6 billion. Singapore, also considered a relatively large player, decreased its holdings by $11.0 billion. Additionally, Mexico also reduced its holdings despite generally being constant. It discharged $6.5 billion of U.S. securities between February and March.
Upon release of the data, the Dollar lost 43 pips against the Euro. EURUSD has since risen from 1.4129 to as high as 1.4215 at time of writing. USDJPY lost almost 20 pips after the news. USDCAD lost almost 40 pips from 0.9742 down to as low as 0.9704 within an hour. GBPUSD lost 160 pips.