U.S. investors are crowding into foreign equities and undermining the U.S. dollar, notes UBS Securities Canada Inc. in a new report.

“One global fund flow trend that seems to have flown somewhat under the radar is that U.S investors are taking to foreign stocks with great zeal,” it notes. “At present, they are on track to purchase a record US$13 billion, largely from Europe and Asia (and to a lesser extent, Canada). And for the first time in history, U.S. mutual fund investors will buy more foreign equities than domestic.”

“This is not a fluke, in our view,” it adds. “Though stock flows have picked up everywhere as equities have risen, the record outflows contrast with foreign purchases of U.S. stocks still less than half their peak level. Indeed, these trends suggest U.S. investors share UBS’ view that European and Asian markets look relatively more attractive, and our expectation that a declining [U.S. dollar] will augment returns.”

The firm also notes that as increasing flows from the U.S. are placing a firmer bid underneath all global equity markets, this reinforces downward pressures on the U.S. dollar. “Inflows to Canada since 2002 have displayed a normal cyclical bounce, but are nowhere near extraordinary, suggesting that a sudden exodus is not a key vulnerability at this time,” it concludes.