Yes, there is a lot of capital outflow from the Europeans but i would think the bulk of it is from the Japanese shifting out of dollar assets into Euros, sterling, and just about any other currency


The issue is not a net outflow but rather the large current account deficit which requires a large net inflow in order to sustain it. A large part of this in the past was equities but also into bonds, both govies and corporates. Now the US 10Y yields less than the Bund, and after Enron, worldcom, tyco, etc. risk aversion to corporates is high.


So is all this an overreaction? possibly, and there could be a short term correction but the virutous cycle for the dollar may be turning