Jan. 17 (Bloomberg) -- International investment in U.S. long-term assets slackened in November as the dollar weakened and purchases of stocks slowed.

Purchases of equities, notes and bonds slowed to a net $68.4 billion, from a revised $85.3 billion in October, the Treasury Department said today in Washington. Including short-term securities, such as Treasury bills and so-called non-market transactions such as stock swaps, foreigners picked up a net $74.9 billion, up from $60.4 billion.

Concerns that the dollar, which lost ground in November, will extend its drop have dissipated as recent reports showed a strengthening labor market and signs of a bottoming in the housing industry. The dollar fell to a 20-month low against the euro in November, a loss it has since partly recouped.

``Investor confidence is high,'' said David Powell, a currency analyst with IDEAglobal in New York. ``The outlook is favorable for 2007. That means we'll likely have larger inflows and that bodes well for the U.S. dollar.''

The net inflow of foreign capital diminished in November because of slower purchases by official sources -- mostly central banks -- and increased overseas investment by Americans. Private investors abroad buoyed the intake, spurred by a record net accumulation of U.S. corporate bonds.

Dollar Drops

The dollar dropped after the Treasury's report, undermined by the figures showing U.S. investors bought a record net $21.2 billion of foreign stocks in November, the third straight month they increased their holdings. Americans also purchased a net $17.8 billion in foreign bonds, the Treasury said.

Against the euro, the dollar lost 0.2 percent, trading at $1.2947 at 11:35 a.m. in New York.

``The surprise for me was the outflow from the U.S. to foreign markets,'' most of which probably went to emerging markets, said Steven Pearson, chief currency strategist at HBOS Treasury Services in London. ``Foreign appetite for U.S. assets was exceptionally strong. The story was the appetite of U.S. investors for risk overseas.''

Economists surveyed by Bloomberg News forecast a net purchase of long-term securities of $75 billion, the median of 14 estimates. In the 12 months through November, foreign net buying of long-term American assets was $72.1 billion.

The Treasury's reporting on long-term securities captures international purchases of U.S. government notes and bonds, stocks, corporate debt and securities issued by U.S. agencies such as mortgage-lenders Fannie Mae and Freddie Mac.

Outpacing Trade Gap

The U.S. trade deficit was $58.2 billion in November. Some economists say the difference between the deficit and securities purchased by foreigners is an indicator of how easily the U.S. can finance its external obligations.

Foreign private investors bought a net $101 billion of long- term securities in November, compared with a net $78.9 billion in October. Official purchases, mostly by central banks, increased by $6.5 billion, down from $25.3 billion the previous month.

Foreigners accumulated a net $27.1 billion in Treasury notes and bonds in November after buying a net $26.3 billion the prior month. Purchases of agency debt rose a net $14.7 billion, slower than the net $15.2 billion bought the previous month.

International purchases of U.S. stocks increased a net $1.8 billion in November, compared with a net $23.2 billion surge the previous month. Corporate bond buying climbed to a net $63.9 billion, from a net $39.5 billion in October, bolstered by a record private net inflow of $60.3 billion.

Fed Rates

The Fed left its benchmark rate unchanged at 5.25 percent for a third consecutive meeting on Oct. 25, a sign policy makers were confident inflation will slow.

China and the U.K. raised their holdings of U.S. government debt, while Japan and oil-producing countries pared their holdings, the Treasury reported.

Japan, the largest holder of U.S. Treasury securities, reduced its holdings by $2.2 billion to $637.4 billion. China, the second-largest holder, lifted holdings by $1.5 billion to $346.5 billion.

Major oil exporters -- a group that includes the members of the Organization of Petroleum Exporting Countries -- sold a net $800 million of U.S. securities. The U.K., which, through London, acts as a transit point for international investors, especially those in the Middle East, added a net $16 billion.

Caribbean banking centers, which analysts link to hedge funds, accumulated a net $7.3 billion.

To contact the reporter on this story: Kevin Carmichael in Washington at kcarmichael@bloomberg.net

Last Updated: January 17, 2007 11:59 EST