This study examines the impact of exchange rate risk on EME bond fund flow volatility against the backdrop of considerable growth in local currency (LC) bond funds among emerging market economies (EMEs) over the past decade. We find that exchange rate volatility triggers a significantly larger increase in fund flow volatility of LC bond funds over hard currency (HC) bond funds in EMEs. This finding has two important policy implications. First, it may reflect a lack of tools for foreign investors to hedge against foreign exchange risk, thus forcing them to move their funds in and out of EMEs in times of volatile exchange rate movements. Second, more rapid growth of LC bond funds among EMEs in recent years means these economies are likely to experience more volatile capital flows than in the past. The implications point to the pressing need for EMEs to develop effective tools for foreign investors to manage their exchange rate risk and to deepen the domestic investor base to contain the impact of the exchange rate on fund flow volatility.