Artificial Intelligence and its Role in Central Bank Forex Risk Management Strategies

TITLE	Artificial Intelligence and its Role in Central Bank Forex Risk Management Strategies
ABSTRACT	The rapid rise of artificial intelligence (AI) is reshaping how central banks approach foreign exchange (forex) risk management. From deep learning models that sharpen forecasting accuracy to reinforcement learning systems that speed up automated trading, AI is bringing both opportunities and challenges. This study explores how predictive analytics, automated decision-making, and AI-driven risk models can enhance market efficiency, improve real-time risk assessment, and increase profitability. At the same time, it highlights the limits of AI during volatile market conditions, where prediction accuracy can falter, and the “black-box” nature of these models can create regulatory and ethical concerns. The findings suggest that the future of forex risk management lies not just in adopting AI, but in making it more transparent, explainable, and compliant—ensuring that innovation does not come at the cost of stability and trust.
AUTHOR	Kitty, Mohammed Ali Adnan, N Jyostna, Nisha Kumari, Patel Mitali, Piya Jain, Rahul Anand, Dr. Batani Raghavendra Rao MBA (Core Finance) students, Jain Deemed to be university, CMS Business, school, Bengaluru, India Faculty of Management Studies, CMS Business School, Jain Deemed-to-be University, Bengaluru, India
PUBLICATION DATE	2025-09-22
VOLUME	12
DOI	DOI:10.15680/IJARETY.2025.1205006
PDF	6_Artificial Intelligence and its Role in Central.pdf
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