Deutsche Bank says the dollar’s traditional safe-haven status is being threatened by the high exposure to AI in U.S. stocks. George Saravelos, global head of foreign exchange research at Deutsche Bank, said investors usually flee to the dollar when stock prices fall, but that is not the case now. “The dollar is often considered a safe haven. It appreciates during times of risk aversion,” Saravelos said in a note published on February 11. “A simple graph of the relationship between the dollar and stocks shows that this is not true. Historically, the average correlation between the dollar and stocks has been close to zero, and last year the dollar once again lost its correlation from the S&P.” Saravelos noted that “AI concentration and cannibalization risk” has made the U.S. stock market more “risky” in relation to the recent decline in software stocks. The sector took a hit earlier this month after Anthropic released a new AI tool that it says can handle professional workflows that many major software companies sell as core products. The S&P 500 Software & Services Index has fallen nearly 20% this year. Additionally, hyperscalers such as Amazon, Microsoft, Meta, and Alphabet have announced up to $700 billion in capital spending on AI this year, raising concerns about profits and whether the scope of AI spending is justified. The market turmoil wiped out more than $1 trillion in market capitalization for big tech companies, but some stocks have since recouped some of their losses. “If the source of negative stock news is in the U.S. and the rest of the world is doing well, it’s entirely possible that as stock prices fall, the dollar weakens, as it did during the dot-com era in 2002,” Saravelos explained. “The less attractive the dollar becomes as a portfolio hedge, the greater the incentive to reduce exposure to the dollar.” He said the dollar is “more broadly losing its exceptionality” as a safe-haven asset against the backdrop of a more positive global growth environment. Instead, currencies such as the Australian dollar, Scandistan currencies, and emerging currencies look more attractive. Beyond AI risks, the dollar has also experienced broader volatility as US President Donald Trump’s imposition of global reciprocal tariffs in 2025 has facilitated “sell America” transactions involving the sale of US assets like the dollar. The dollar index fell by 9.4% in 2025 and by 1.4% since the beginning of this year. Peter Boockvar, chief investment officer at BFG Wealth Partners, said on CNBC’s “Power Lunch” last week that investors are seeing opportunities outside the U.S. after last year’s dollar’s worst performance in the first half of the year since the 1970s. “And investors said, ‘Hey, 7 stocks aren’t all our options. We had opportunities all over the world, and they took advantage of them,'” Boockvar said. “Foreigners continued to invest in the U.S. last year, but they were hedging their dollar exposure to a degree we’ve never seen before. So they were saying, ‘We’ll hold Mag 7 stocks, but we need to hedge them.'”
