This paper investigates the sensitivity of the demand for safe government debt to currency unhedged and hedged excess returns in a sample of US mutual funds. We find evidence of active rebalancing towards government bonds that offer relatively higher returns on an unhedged basis, in particular...

Foreign institutional investment (FII) is believed to affect real economy of a country through its impact on factors such as exchange rates and foreign exchange reserves. Similarly, exchange rate movements are also believed to affect the FII coming to the country and foreign exchange reserves of...