Key points
- Includes foreign direct investment and portfolio flows.
- Can drive currency movements and asset prices.
- Volatile flows signal risk sentiment changes.
Example
Heavy inflows into US Treasuries during risk-off episodes can strengthen the dollar while pulling long-end yields lower.
In history
During the 2013 Taper Tantrum, emerging markets saw tens of billions in outflows as US yields spiked, crushing local bonds and FX.
Related terms