The “AI dollar era” has arrived, Deutsche Bank warns that the dollar's safe-haven position may not be stable

The Zhitong Finance App learned that Deutsche Bank said that during the period of AI-driven market adjustments, it should not be taken for granted that the US dollar will continue to maintain its position as a safe-haven asset. George Saravelos, the bank's head of global foreign exchange strategy, said in a report to clients on Friday that the risks faced by the US dollar were “far more complicated than the market's pricing in the past few weeks.” He added that the recent weakening of technology stocks and the US dollar at the same time supports this judgment.

One reason is that foreign investors hold US stocks on an unprecedented scale. Salavelos pointed out that currently overseas investors actually fully finance the US current account deficit. However, the increase in their holdings was mainly due to rising valuations rather than new purchases — Deutsche Bank estimates that about 90% of the more than $20 trillion US stocks held by foreign investors reflected price appreciation.

Another key factor is the dynamic changes in stock hedging. Over the past ten years, US stocks have had a negative correlation with the US dollar, which makes it easy for investors to choose not to hedge currency risks. However, when the stock market shock originates in the US, this relationship will reverse to a positive correlation. The dollar falls at the same time as stocks, thereby amplifying foreign investors' stock losses.

Further evidence of the US dollar's loss of safe-haven properties is the simultaneous decline in real US yields and stock prices. Saravelos believes that this year's rise in interest rates and stock prices is related to the increase in AI-related capital expenditure expectations.

“The simultaneous decline in real US yields with the stock market will be in line with these expectations being lowered,” he pointed out.

Saravelos said that although he is not judging the future of the AI ecosystem, changes in the relationship between risk assets and the US dollar deserve more attention. “The AI dollar era has arrived,” the report reads.