(Adds details, comment, market reaction)
By Gertrude Chavez-Dreyfuss
NEW YORK, Sept 16 (Reuters) - Foreign investors sold U.S. assets for a fourth straight month in July, with private outflows hitting their highest since February, Treasury data showed on Wednesday.
Net overall capital outflows from the United States increased to $97.5 billion in July from a revised outflow of $56.8 billion the previous month.
Private investors sold $131.3 billion in U.S. assets in July, up from sales of $53.3 billion in June.
Excluding swaps, international investors bought a net $15.3 billion, dropping from $90.2 billion in June. This is a key gauge of foreign investor appetite because they exclude short-term transactions.
"A weaker capital flows number was U.S. dollar-negative at the margin," said Brian Dolan, chief currency strategist, at Forex.com Bedminster, New Jersey.
The dollar fell in the aftermath of the capital flows report, although data showing an outflow was not a surprise to most market participants.
But analysts said there were certain positive aspects to the flows data.
For instance, the report showed huge central banks such as Japan and China remained buyers of U.S. assets. China's holdings of U.S. Treasuries rose to $800.5 billion in July from $776.4 billion in June.
Japan also raised its Treasury holdings to $724.5 billion from $711.8 billion in June.
Russia though reduced its investment in U.S. government bonds to $118.0 billion from $119.9 billion.
"Bottomline: the big global reserve managers (with the possible exception of Russia) are not dumping dollar assets on a sustained basis." said Win Thin, senior currency strategist at Brown Brothers Harriman in New York.
He added that while China's and Japan's holdings are sometimes volatile on a monthly basis, the upward trend in U.S. Treasury holdings remained intact despite China's warnings about the dollar.
"In these times, it is important to watch what China does, not what it says," Thin said.
Overall, official buyers, which include foreign central banks, bought $33.8 billion U.S. assets in July from sales of $3.5 billion the previous month.
The report also showed foreign buying of U.S. Treasuries to $31.13 billion in July, a steep fall from the previous month's purchases of $100.53 billion.
Foreign investors further piled into U.S. equities, with buying of $28.61 billion from inflows of $19.05 billion in June.
(Editing by Chizu Nomiyama)