insuranceadvisory

The Euro-zone capital flows report for September 20015 shows that the Euro-zone, which had been recording monthly capital outflows (combined direct and portfolio investment) from 1999 through the first half of 2001 started to record capital inflows in the second half of 2001 and in September of that year saw the second highest monthly inflow since the establishment of the Euro in January 1999. This was also the fourth consecutive net inflow. Comparing the first nine months of 2001 to 2000, the total net outflow fell to EUR51.3 billion from EUR87.5 billion, an important reason for the Euro’s more stable performance. Within this overall flow picture, net fixed income inflows rose substantially to EUR16.6 billion in September, a five-fold increase from the previous month’s small inflow. Indeed, for the first time since the inception of the Euro in January 1999, the assets side of total portfolio investment (Euro-zone-based investors) switched to net inflows in September 2001.
Finally, equity flows recorded a net inflow for the fifth straight month in September rising to more than double August’s level at EUR28.3 billion. All of this helps to support a picture of an improving flow story for the Euro in the second half of 2001. This does not definitively suggest on its own that the Euro should appreciate against its major currency counterparts. It does appear to suggest however that the Euro should at the least be more stable — and this is more or less what happened, excluding the specific volatility caused by the tragic events of September 11.