Capital flooded out of the euro zone in July as investors responded to brightening growth prospects in the United States, helping to send the commoncurrency lower, European Central Bank data showed today.
The ECB reported net outflows in both portfolio and directinvestment in July that reversed big investment inflows in June.
As a result, net investment into the euro zone recorded anoutflow of €38.9 billion euros in July, after a €37.0 billion net inflow in June.
Analysts said the data confirmed a big bond selloff in Julythat helped to send the euro sharply lower.
The ECB said that the net portfolio outflows in July weremainly due to net purchases of foreign bonds and notes byresidents that coincided with net sale of euro area bonds andnotes by non-residents.
These net outflows were only slightly offset by inflows inmoney market funds and equity portfolio investment.
Net portfolio investment showed outflows of €35.3 billionin July, compared with inflows of €12.9 billion inJune.
The trade weighted index average of the euro in July slippedto 104.1 from 105.3 in June. Against the dollar, the euro fell2.5 per cent to an average of $1.1372 in July versus $1.1663 inJune, according to ECB data.
Direct investment by companies also swung into the red withnet outflows of €3.6 billion in July, after net inflows of€24.0 billion in June.
The current account for July recorded a smaller net surplusin July at €1.2 billion, compared with June's surplus of€2.8 billion. However, the ECB reported that in seasonallyadjusted terms, the current account balance was zero in July,after a surplus of €2.1 billion in June.