US Dollar: AI-driven inflows support Dollar – Commerzbank

Commerzbank’s Volkmar Baur argues that a major US technology IPO could generate sizeable foreign capital inflows, supporting the US Dollar, particularly against the Euro. He notes that only a small initial free float still implies around USD 15 billion of foreign buying, with further inflows likely as lock-up periods expire and additional US AI-related equity issuance comes to market.

AI IPO flows seen Dollar supportive

"20% of USD 75 billion amounts to at least USD 15 billion in capital that is likely to flow into the US on Friday. In the past quarter, the US current account deficit was seasonally adjusted at USD 190.7 billion. A not insignificant 8% of the quarterly current account deficit could thus be refinanced in a single day."

"This should therefore support the US dollar, particularly against the euro, if half of the capital inflows come from Europe."

"Over the coming months, shareholders will increasingly be allowed to sell their shares as well, provided they wish to do so, once the so-called “lock-up” periods end. Since most of the initial shareholders are likely early investors and employees, it can be assumed that they are predominantly US citizens. So if the proportion of foreign investors here also aligns with the normal average in the coming months, further capital inflows into the US are likely to be generated."

"The IPO and the anticipated capital inflows demonstrate that the AI boom is supporting not only the US economy but also the US dollar. At the same time, however, it is also clear how dependent the US economy and the US dollar are on the success of AI-related business models."

"And ultimately, it will depend on the success of these companies whether investors remain loyal to them or lose confidence and withdraw their capital."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)