James William D Hill#62

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How do capital account flows affect forex markets?

Capital accounts measure investments in equities, bonds, and assets. Strong inflows boost currency demand, while outflows weaken it. For example, U.S. dollar strength often reflects global appetite for U.S. financial markets. Institutions track TIC data, IMF reports, and global fund flows. Retail traders can monitor equity indices and bond yields as capital flow proxies. Benefits: capital flows are powerful long-term drivers. Risks: sudden reversals, such as emerging market sell-offs, can cause sharp depreciation. Capital account analysis complements current account data—together they explain the twin forces shaping currencies: trade and investment.