(Adds details, comments, market reaction)
By Wanfeng Zhou
NEW YORK, Oct 16 (Reuters) - Foreign investors' appetite for U.S. securities rebounded in August after four straight months of net selling, the Treasury Department said on Friday.
Net overall capital inflows into the United States rebounded to $10.2 billion in August from a revised outflow of $107.7 billion the previous month. The department originally reported outflows of $97.5 billion for July.
Excluding swaps, net long-term capital inflows rose to $28.6 billion from $15.3 billion inflow in the previous month. This is a key gauge of foreign investor appetite because they exclude short-term transactions.
"There's nothing too surprising," said Omer Esiner, senior market analyst at Travelex Global Business Payments in Washington. "I don't think there's any evidence in this data that suggests demand for U.S. assets is declining at a pace that warrants concern."
The U.S. dollar shrugged off the report as the numbers were largely in line with expectations. Analysts also said that given the outflows in previous months, it's not surprising to see demand recover a little bit in August.
China, the largest holder of U.S. Treasury securities, slightly reduced its holdings of U.S. government bonds to $797.1 billion in August. In July, it held $800.5 billion.
But the reduction was offset by increases in buying from Japan and Russia.
Japan raised its Treasury holdings in August to $731.0 billion from $724.5 billion in July while Russia boosted its investment in U.S. government bonds to $121.6 billion from $118.0 billion.
Kathy Lien, director of currency research at GFT Forex in New York said the report also showed that investors moved their money from short to long term Treasuries, reflecting "increased confidence in the outlook for the U.S. economy."
"The latest report (also) indicates that investors have not been so discouraged by the dollar's weakness that they have completely stopped buying dollars," Lien said.
Despite the rebound in foreign demand for U.S. assets, the inflows for August were not enough to cover the U.S. trade deficit of $30.7 billion for the same month.
"Although foreign investors continue to purchase long-term U.S. securities, total capital inflows, which include short-term flows, are not large enough to offset downward pressure on the dollar from the trade deficit," Jay Bryson, global economist at Wells Fargo, wrote in a research note.
Overall, official buyers, which include foreign central banks, sold $4.7 billion U.S. assets in August from purchases of $33.8 billion the previous month.
Foreign private investors bought a net $14.9 billion U.S. assets, reversing outflows of $141.4 billion in July.
Foreign investors also sharply reduced their holdings of U.S. equities in August with purchases of $10.46 billion, down from inflows of $28.61 billion in the previous month. (Editing by Theodore d'Afflisio) (wanfeng.zhou@thomsonreuters.com; +1 646 223 6304; Reuters Messaging: wanfeng.zhou.reuters.com@reuters.net))