WASHINGTON, United States – FOREIGN demand for long-term US financial assets jumped sharply in November, rising to the highest level in more than two years even though China’s holdings of Treasury securities fell.

Analysts viewed the big increase as a sign of renewed optimism among foreign investors about economic growth prospects in the United States. Continued strong demand for US debt is critical to financing America’s soaring budget deficits and keeping domestic interest rates low enough to support a sustained economic recovery.

The Treasury Department said yesterday that foreigners purchased US$126.8 billion more in assets than they sold in November, the largest gain since an increase of US$128.9 billion in October 2007.

China, the largest holder of US Treasury securities, trimmed its holdings by US$9.3 billion in November, pushing them down to US$789.6 billion, the smallest level since last June.

Japan, the second largest owner of US Treasuries, boosted its holdings in November by US$11.4 billion to US$757.3 billion and a number of other nations also increased their holdings as well.

Private purchases of US domestic long-term securities, a category that includes government and corporate investments, jumped to a record US$96 billion in November, up from a net increase of US$28.4 billion in October.

Analysts said this sharp jump in demand for US investments reflected rising optimism among foreign investors about US growth prospects.

“On a relative basis, the United States looks good,” said Brian Bethune, chief US economist at IHS Global Insight. “Investors are realising that the US economy is well ahead of Europe and Japan in terms of pulling out of the recession. That means US assets look more attractive.”

Some economists said the boost for the United States could also represent in part a flight to safety by investors worried about debt problems in Dubai and such European nations as Greece.

Analysts did not see the one-month drop in China’s holdings of US Treasury securities as significant. But Win Thin, senior currency strategist for Brown Brothers Harriman & Co in New York, said it would be important to watch developments in China in coming months to see if a trend is developing. Chinese government officials have been particularly vocal in expressing their unhappiness with the surging US government deficit.

The amount of US Treasuries held by Britain rose to US$277.5 billion while the hold of Russia climbed to US$128.1 billion. Holdings of US Treasuries by Brazil and Hong Kong rose, but the holdings of oil-exporting countries fell slightly in November.

China’s holdings are a result of the huge trade deficits the United States runs with China. The Chinese take the dollars Americans pay for Chinese products and invest them in Treasury securities and other dollar-denominated assets.

American manufacturers argue that China’s huge dollar reserves reflect a strategy by the Chinese government to keep its currency artificially low against the dollar as a way to boost Chinese exports and dampen demand in China for American products. A stronger dollar compared to the yuan makes Chinese goods cheaper in the United States and US products more expensive in China.

On a visit to China in November, President Barack Obama urged the Chinese government to allow its currency to rise in value against the dollar while Chinese officials continued to express concerns about the soaring US budget deficit.