MUFG Research discusses the impact of AI on FX markets

"AI is evolving from a technology-equity theme into a broader macro and FX driver through six key channels: capital investment, trade flows, productivity, central bank policy, capital flows, and terms of trade. The USD has been the main beneficiary so far, supported by the concentration of AI-related investment in the US and strong foreign demand for US AI-linked assets.

Taiwan and South Korea have been among the largest trade beneficiaries of the AI hardware boom, generating exceptionally large trade surpluses that would normally support much stronger currencies. However, heavy overseas investment by residents and foreign selling of domestic equities have recycled much of the export windfall abroad, limiting appreciation of the TWD and KRW despite sharply improved external balances," MUFG notes.

"The AI buildout is also creating potential winners among commodity-exporting currencies by boosting demand for copper, energy and other critical inputs. The strongest beneficiaries are likely to be the CLP and PEN through higher copper prices, while the AUD, CAD and BRL should benefit from the broader positive terms of trade shock associated with AI-driven infrastructure investment," MUFG adds.