AI-driven divergence in Asian foreign exchange markets Report Interpretation

Overview

This Asian FX outlook links currency performance to economies’ exposure to AI-driven technology demand. Goldman Sachs expects strong tech exports and external balances to continue favoring several North Asian and Southeast Asian currencies, while macro vulnerabilities leave others less supported.

Core views

Goldman Sachs argues that Asian FX performance this year has been shaped primarily by exposure to the AI and technology investment cycle. Currencies tied to semiconductor and technology exports—KRW, TWD, SGD and MYR—have outperformed higher-yielding but less technology-exposed currencies such as INR, IDR and PHP. The report says the earlier energy shock was a larger headwind in Q2, but its drag has faded as regional-growth effects proved less severe than initially feared. AI investment has more than offset energy-related current-account deterioration for tech-exporting economies, widening the gap between the region’s “AI haves” and “have-nots.” OECD TiVA data identify Taiwan, Singapore, South Korea and Malaysia as Asia’s most technology-oriented economies. KRW is presented as the clearest reversal. It moved from Asia’s worst-performing currency in H1 to the best performer year to date. Goldman Sachs attributes the H1 weakness—despite record technology exports and a 100% equity-market rally—to roughly US$100bn of foreign equity outflows related to index rebalancing and concentration-risk management. Since July, KRW has rallied 12% against the USD after a near-30% KOSPI correction helped moderate those outflows. The report expects Korea’s 2026 current-account surplus to reach a record US$400bn, or 19% of GDP, and views that external surplus as the key FX support once equity-flow pressure eases. Equity flows remain critical, but the institution expects a broader KOSPI rally rather than continued concentration in a few stocks and therefore maintains a constructive KRW view. For SGD, MYR and TWD, the report sees the same AI-demand mechanism operating through exports, external accounts and supply-chain investment. The Monetary Authority of Singapore noted in July that global demand for AI-related products had offset energy-shock effects; Goldman Sachs says this dynamic also applies to Taiwan and Malaysia. After two policy tightenings earlier in the year, it expects the MAS to remain on hold, implying gradual SGD appreciation rather than major outperformance. Taiwan’s export growth remains exceptionally strong and its 2026 current-account surplus is forecast to reach a record 25% of GDP; although the CBC appears to be managing the pace of TWD appreciation, strong external balances should underpin outperformance. MYR is supported by favorable terms of trade, semiconductor-supply-chain exposure and data-center-related FDI. State elections temporarily raised the political risk premium, but the report expects MYR outperformance to resume as political uncertainty eases. Goldman Sachs also remains constructive on CNY despite softer domestic growth. It emphasizes China’s external position: the ex-gold trade surplus reached a cumulative US$1.3tn over the past 12 months, supported by rising competitiveness in advanced manufacturing and technology. Fiscal support and accommodative PBoC liquidity operations should stabilize growth in H2, but the report identifies the external balance—not domestic support—as the principal CNY driver. CNY has appreciated steadily against the USD, remains significantly undervalued on Goldman Sachs’ metrics, and may gain further as the trade surplus widens and policymakers favor gradual appreciation to support CNY internationalization. With onshore spot, offshore spot and the fixing already above its former three-month target of 6.80, Goldman Sachs revised USD/CNY forecasts to 6.70, 6.60 and 6.40 over 3, 6 and 12 months, respectively; it says this is slightly more bullish than consensus and forward markets. The report contrasts those currencies with IDR, INR and PHP. In Indonesia, confidence has stabilized after BI Governor Perry Warjiyo’s resignation, the appointment of Deputy Governor Destry Damayanti and a fiscally prudent 2027 budget with a 2.4%-of-GDP deficit. However, Goldman Sachs believes reluctance to use higher rates or SRBI yields to attract inflows could leave IDR vulnerable if global yields stay high and rate differentials narrow. India’s improving external balances, stronger FDI and renewed portfolio inflows have reduced balance-of-payments concerns, but the report sees limited scope for sustained INR appreciation because the RBI is likely to use currency-strength episodes to rebuild reserves. PHP remains the most explicitly bearish view: elevated inflation risk, weak growth momentum and current-account concerns are expected to constrain the outlook, while modest additional BSP tightening is unlikely to materially improve FX prospects if oil prices remain elevated and growth stays sluggish.

Analysis framework

The report compares Asian economies’ technology-export exposure with year-to-date currency performance, then assesses how export growth, current-account balances, equity and portfolio flows, monetary-policy settings, terms of trade and political conditions transmit into each currency’s outlook.

Methodology notes

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  AI demand flowing through technology and semiconductor supply chains into exports and external balances

  The report uses countries’ positions in technology supply chains to explain why AI-related demand supports exports, current accounts and ultimately the relative performance of their currencies.

• Other

  External-balance and capital-flow assessment for FX

  Goldman Sachs weighs trade and current-account surpluses alongside equity flows, FDI, portfolio inflows, rate differentials and reserve management to assess currency support or vulnerability.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• KRW

  Beneficiary of record technology exports, a widening current-account surplus and improving equity-flow conditions.

  Strengths

  Goldman Sachs forecasts a US$400bn 2026 current-account surplus, equal to 19% of GDP.

  Weaknesses

  H1 performance was undermined by roughly US$100bn of foreign equity outflows.

  Comparison

  Outperformed less technology-exposed INR, IDR and PHP after its reversal.

  Risks

  Equity flows remain critical to the outlook.

• CNY

  Supported by China’s trade surplus, export competitiveness and undervaluation.

  Strengths

  Ex-gold trade surplus reached US$1.3tn over the past 12 months; policymakers favor gradual appreciation.

  Weaknesses

  Domestic growth remains soft.

  Comparison

  Goldman Sachs is slightly more bullish than consensus and forward markets.

• TWD

  Beneficiary of exceptional export growth and AI-related technology demand.

  Strengths

  2026 current-account surplus is forecast at a record 25% of GDP.

  Weaknesses

  The CBC appears to be managing the pace of appreciation.

  Comparison

  Classed among Asia’s technology-oriented outperformers.

• MYR

  Supported by favorable terms of trade, semiconductor supply-chain exposure and data-center FDI.

  Strengths

  Benefits from AI-related investment and easing political uncertainty.

  Weaknesses

  Recent state elections temporarily raised the political risk premium.

  Comparison

  Grouped with other AI-linked currency outperformers.

  Risks

  Political uncertainty could re-emerge.

• PHP

  Viewed negatively because domestic and external pressures limit the FX outlook.

  Strengths

  Further BSP tightening remains in the pipeline.

  Weaknesses

  Elevated inflation risk, weak growth momentum and current-account concerns.

  Comparison

  Expected to lag the region’s technology-linked currencies.

  Risks

  Elevated oil prices and sluggish growth could prevent a meaningful improvement in the outlook.

Key data

• KRW performance since July12% rally against the USDOccurred after foreign equity outflows moderated following a near-30% KOSPI correction.
• Korea 2026 current-account surplus forecastUS$400bn, 19% of GDPGoldman Sachs describes this as a record and a key FX support for KRW.
• Foreign equity outflows from Korea in H1Roughly US$100bnAttributed to index rebalancing and concentration-risk management.
• Taiwan 2026 current-account surplus forecast25% of GDPExpected record surplus supporting TWD.
• China ex-gold trade surplusUS$1.3tn cumulative over the past 12 monthsCited as evidence of strong external support for CNY.
• Revised USD/CNY forecasts6.70, 6.60 and 6.40Forecasts for 3, 6 and 12 months, respectively; the previous three-month target was 6.80.
• Indonesia 2027 fiscal deficit2.4% of GDPThe report characterizes the budget as fiscally prudent.

Impact & implications

The report’s central implication is that AI-related technology demand is becoming a differentiator within Asian FX by strengthening exporters’ trade and current-account positions. It favors currencies with that support, while currencies constrained by narrower rate differentials, inflation, oil exposure, current-account concerns or reserve-management policy may lag.

Risks

• KRW remains sensitive to foreign equity flows despite its stronger current-account position.
• IDR could be vulnerable if global yields remain elevated and rate differentials narrow.
• MYR’s political-risk premium could persist if political uncertainty does not continue to ease.
• PHP faces inflation, weak-growth, oil-price and current-account risks.