The dollar’s traditional safe-haven status is being challenged by high exposure to AI in U.S. equities, according to Deutsche Bank. Investors typically take flight to the dollar when stocks are falling, but that’s no longer the case, said George Saravelos, global head of FX research at the German bank. “It is often taken as fact that the dollar is a safe-haven: it rallies during risk-aversion,” Saravelos said in the note published on Feb. 11. “A simple chart of the dollar – equity relationship shows this not to be true. The average USD-equity correlation has historically been closer to zero, and over the last year, the dollar has once again de-correlated from the S & P.” Saravelos noted that the U.S. stock market has become more “risky” due to “AI concentration and cannibalization risks,” in reference to the recent sell-off in software stocks . The sector was pummelled earlier this month after Anthropic released new AI tools that it said can handle professional workflows, which many big software firms sell as core product offerings. The S & P 500 Software & Services Index is down nearly 20% this year. Additionally, hyperscalers, including Amazon , Microsoft , Meta , and Alphabet , announced capital expenditure of up to $700 billion on AI this year, which has raised concerns over returns and whether the extent of AI spend is justified. Those market jitters saw over $1 trillion wiped from the market caps of big tech firms, though some stocks have since recovered some of their losses. “When the source of negative equity news is in the U.S., and the rest of the world is doing better, it is entirely possible for the dollar to fall as equities are going down, just like the 2002 dotcom period,” Saravelos explained. “The less attractive the dollar as a portfolio hedge, the more incentive there is to reduce dollar exposure.” He noted that the dollar has more broadly “lost its exceptionalism” as a safe-haven asset in the backdrop of a more positive global growth environment. Instead, currencies such as the Australian dollar, the Scandis, and emerging currencies are looking more attractive. Beyond AI risks, the dollar has more broadly experienced volatility due to U.S. President Donald Trump imposing global reciprocal tariffs in 2025, which drove a ” sell America ” trade, including a sell-off of U.S. assets like the dollar. The dollar index declined 9.4% in 2025, and has shed 1.4% so far this year. .DXY YTD line The U.S. dollar index year-to-date Peter Boockvar, chief investment officer at BFG Wealth Partners, said on CNBC’s “Power Lunch” last week that investors saw opportunities outside the U.S. last year after the dollar saw its worst performance in the first half of the year since the 1970s. “And investors said, ‘Hey, seven stocks are not all of our choices. We have an entire world of opportunities, and they took advantage of it,” Boockvar said. “Foreigners still continued to invest in the U.S. last year, but they hedged their dollar exposure to an extent that I’ve not seen before. So they said, ‘We’ll own the Mag 7 stocks, but we need to hedge up,'” he added.
