7. Factors affecting international capital flows An increase in the tax rate on dividends in a country is likely to portfolio investment in that country. If a country's currency is expected to strengthen relative to the I potential foreign investor, direct foreign investment (DF1) becomes likely. 7. Factors affecting international capital flows ise in the tax rate on dividends in a country is likely to portfolio investment in that country. try's currency is expected to strengthen relative to the currency of a potential foreign investor, direct foreign investment (DFI) becomes likely