Asian currencies from economies riding the artificial intelligence wave are positioned to become the biggest winners against a declining US dollar next year, according to a top strategist at Point72 Asset Management.
Dollar Decline and AI Connection
Sophia Drossos, strategist and economist at Point72 Asset Management, predicts the US dollar will continue its weakening trend into 2026, though at a more moderate pace than this year's significant 7.1% drop. The beneficiaries of this dollar decline will likely emerge from Asian nations where currencies have failed to keep up with substantial AI-driven stock market rallies.
"As the AI theme expands globally, I would focus attention on China and Korea," Drossos stated during an interview in New York. "Korean equities have demonstrated remarkable performance this year, yet the currency remains comparatively weak."
Asian Tech Stocks Outperform Currencies
Technology companies across Asia have been driving emerging-market equities throughout this year, with Korean stocks surging approximately 70% and Chinese stocks rallying more than 35%. Despite these impressive equity performances, both the won and yuan have struggled to match this pace, making them prime candidates for appreciation in 2026 according to Drossos's analysis.
The Korean won has managed a modest 1% gain so far in 2025, following four consecutive years of losses. Meanwhile, the offshore yuan has appreciated more than 3% during the same period, benefiting from easing trade tensions between the United States and China. However, it currently ranks only as the fifth best-performing Asian currency this year.
US Economic Outlook and Global Impact
In the United States, fresh economic data emerging after the resolution of the federal government shutdown is expected to reveal moderating economic growth, Drossos noted. This economic cooling will likely create conditions for the Federal Reserve to implement interest rate cuts in December, further contributing to dollar weakness.
All currencies within the Group of 10 nations have strengthened against the dollar this year, as the greenback faces pressure from ongoing trade tensions and concerns about the economic outlook. The Bloomberg Dollar Spot Index is heading toward its worst annual performance since 2017, even as US stock markets continue reaching record highs.
"Despite the United States showing strong performance, other countries have demonstrated even better results," Drossos observed. "International investors have capitalized on more attractive valuations available in other economies."
