#FedRateCutAffectsDollarTrend Impact on Capital Flows*: Conversely, when the dollar strengthens due to a flight to safety, capital tends to flow out of riskier emerging markets into U.S. assets, further exacerbating financial instability in these markets during a crisis. Fed rate cuts aimed at stabilizing the U.S. economy can cause significant shifts in capital flows across the globe, leading to changes in emerging market currencies and debt markets.