AI is transforming capital allocation in forex trading by optimizing investment distribution across currency pairs to maximize returns while minimizing risk. Using machine learning algorithms, AI analyzes historical price trends, volatility, liquidity, and macroeconomic indicators to determine the best capital allocation strategies. AI-powered predictive models forecast market movements, ensuring funds are allocated efficiently across different forex assets. One key approach is risk-adjusted capital allocation, where AI assigns capital based on each currency pair's risk-return profile. Reinforcement learning models continuously refine allocation strategies by adapting to market fluctuations, ensuring optimal investment decisions. AI-driven Monte Carlo simulations and Value-at-Risk (VaR) assessments help traders measure potential losses and adjust allocations dynamically. AI also enhances liquidity management by ensuring capital is distributed efficiently across high-volume trading pairs, reducing slippage and transaction costs. Financial institutions and hedge funds use AI-powered capital allocation models to build resilient forex portfolios. However, human oversight remains essential to validate AI-generated recommendations and incorporate external factors like central bank policies and geopolitical risks.