Besides the U.S., the U.K. screens as a beneficiary of the AI boom

Portfolio inflows are the big dollar driver but M&A are increasingly important

Interest-rate differentials, inflation trends and trade balances are usually thought of as drivers of foreign-exchange movement - but increasingly, the drivers in the currency market are companies looking to expand their offerings in artificial intelligence.

The findings were reported by Bank of America's global rates and currencies team led by Adarsh Sinha in a note published Thursday. He found that among G10 economies a rising share of inflows via M&A were concentrated in tech, and these flows tended to dovetail neatly with those countries Bank of America expects to benefit from structural AI trends. Not only is the number of M&A deals increasing, but their value is also surging, the research note observes.

Cross-border M&A inflow to tech sector in G10 markets. Structural trend higher in value & non-US share of cross-border tech M&A

The U.S. still dominates these trends but it's clear that the breadth is increasing with the share of non-U.S. tech M&A jumping from 42% in 2016 to 76% last year. The U.S. and China are the two AI superpowers, but swings in technology-related foreign direct investment will be very influential for other currencies too, Sinha maintains.

For the dollar DXY, "relative equity flows (chiefly foreigners buying U.S. tech stocks) will be more important for its prospects, not to mention, more volatile than FDI flows." One other currency that could benefit from its status as a hub for all things AI-related is sterling (GBPUSD) but activity in Europe is too fragmented to have a significant impact on the euro (EURUSD).

The dollar has been relatively stable in 2026, its broad index against other major currencies having risen 1.6% so far this year. Since the war with Iran kicked off in February it has oscillated around the 100 level and in Thursday morning trading it's currently down just 12 basis points on the day at 99.89

-Jules Rimmer