Is the dollar moving from a “safe haven king” to a highly volatile asset? Global capital chases US stocks AI theme The fate of the dollar seems to be tied to Nasdaq

The Zhitong Finance App learned that international financial giant Deutsche Bank said in a research report on Thursday that in terms of financing itself, the US financial market relies more than ever on international capital flows into domestic companies' stocks rather than investing in their debts to raise capital on a large scale; a team of Deutsche Bank analysts said that this shift may put the US dollar exchange rate at a higher level of risk.

The bank said in this research report to clients that geopolitical rift is weakening the will of international investors to hold US debt for a long time, while the artificial intelligence boom means that more capital is flowing into the US stock market, leaving the US dollar more and more exposed to the uncertain life cycle of the cutting-edge technology industry.

US external financing is shifting from countercyclical, long-term US debt funding to technology stock market funding that is more cyclical and relies more on AI narratives. As a result, the US dollar may gradually shift from a traditional safe-haven asset to a highly volatile risk asset that is highly linked to the NASDAQ 100 index, which has the title of a “global technology stock weather vane.”

Foreign capital is shifting from US debt to US stocks, and the dollar is gradually evolving from a “safe haven king” to a high-tech high-beta asset?

Malika Sachdeva, a senior financial market analyst at Deutsche Bank, said that the US external deficit financing model is shifting to relying more on equity-type funding, which means that the risk characteristics of the US dollar will also change.

As the US increasingly relies on foreign capital to buy stocks rather than treasury bonds to make up for external financing gaps, the US dollar lost part of the stabilizer provided by countercyclical demand for US bonds, and became more sensitive to the topic of AI computing power and the entire technology stock bull and bear cycle.

“Demand for US Treasury bonds is often highly countercyclical, providing support for the US dollar during periods of economic recession or risk asset pullback. This diversification of risk diversification encourages investors to hold unhedged exposure to dollar-denominated assets. If the financing model shifts to a more cyclical, retail-driven flow of equity-type capital, the US dollar exchange rate will also become riskier and more dependent on the super bull market associated with artificial intelligence.” she said.

It can be said that the US continues to face a “double deficit”: the current account deficit in 2025 is about 1.12 trillion US dollars, and the trade deficit is about 1 trillion US dollars. The ability to attract huge inflows of foreign capital over a long period of time is at the core of the US government's ability to maintain its own financing.

Sajdeva's views echo those of Reserve Bank of Australia Deputy Governor Andrew Houser. Hauser said earlier this year that the shift of capital from bonds to stocks marks that the US is gradually losing its “excessive financial privileges” — since the US dollar is a global reserve currency, the US used to be able to borrow on a large scale according to its own wishes.

Despite this, the dollar's value has rebounded significantly this year. Last year, as US President Donald Trump's policy approach on international relations and trade issues was difficult to predict, and the US debt burden continued to rise, the market tended to think that the dollar would experience a longer-term, more structural decline, and the dollar depreciated sharply by nearly 10% that year.

Today, the US dollar has recovered nearly half of its 2025 decline. The driving factors include the uncertainty brought about by the war between the US and Israel against Iran, the possibility that the Federal Reserve under Walsh's helm may be tempted to raise interest rates in the near future to tighten monetary policy and may significantly weaken the Federal Reserve's market communication mechanism, and a record flow of capital into the US domestic market to pursue artificial intelligence investment themes.

Last month, after taking charge of the Federal Reserve, Walsh placed the price stabilization mechanism and changing the Fed's expected management mechanism to a “less communication model” back at the center of the Federal Reserve's monetary policy, superimposed the Wall Street repricing and interest rate hike path, and jointly pushed the US dollar index to achieve the strongest monthly performance in nearly a year.

The recent resurgence of bullish sentiment in the US dollar basically stemmed from Kevin Warsh (Kevin Warsh) officially taking charge of the Federal Reserve. His strong hawkish commitment to restoring the price stability mechanism, as well as communication methods with the market, which are viewed as more hawkish, have strengthened the market's expectations that the dollar will appreciate and that the benchmark interest rate will be tightened for a long time, that is, higher US interest rates will support the dollar.

The dollar's fate appears to be tied to the Wall Street tech stock bull cycle

Deutsche Bank's core warning is not that “foreign capital has abandoned US debt,” but rather that the marginal financing structure of America's external deficit is shifting from relatively stable, countercyclical treasury bond funding to more cyclical and risk-prone stock capital.

Foreign investors buy US stocks mainly to provide balance-of-payments financing for the US current account deficit, and do not directly fill the Treasury budget gap; in the end, fiscal deficits still have to be funded through treasury bond issuance. However, if structural demand for US bonds from foreign government agencies and long-term allocations weakens, additional treasury bonds will need to be taken over by local US investors, banks, money market funds, and more price-sensitive overseas private capital. This usually means that the Treasury must pay higher term premiums, making it harder for the US bond yield center to continue to decline.

As far as US debt is concerned, this change is biased towards medium- to long-term weakness and short-term two-way fluctuation intensifies. In the past, when the global economy declined or risk assets plummeted, capital often flowed into the US dollar and US treasury bonds simultaneously, forming a countercyclical buffer of “rising US debt — strengthening the dollar”; if foreign capital increasingly enters US stocks for the purpose of chasing AI and US corporate profits, the dollar balance sheet will rely more on risk appetite than on safe-haven needs. Once AI profit expectations cool down and US stocks are deeply adjusted, foreign investors may simultaneously reduce their stock holdings and hedge against the US dollar, thereby weakening the dollar's safe-haven support; and US bonds may not automatically obtain sufficient overseas purchases as before.

The Federal Reserve's latest financial stability assessment has pointed out that the forward price-earnings ratio of stocks is still in a high position in the historical range, while the US bond maturity premium is rising, indicating that “highly valued stocks and high long-term US bond yield curves” may coexist, rather than simply a pullback in US stocks will inevitably trigger a major US bond bull market.

The main line of the AI computing power infrastructure bull market in the US stock market has yet to empty due to this report, but its macro position may be upgraded from a “high-growth asset” to a key bearing wall supporting the US international capital cycle; US bonds are under pressure from weakening overseas structural demand and rising maturity premiums. As far as the global financial asset allocation strategy is concerned, this means that investors can no longer mechanically assume that “US stocks will fall, US debt will definitely rise, and the US dollar will definitely be safe-haven and strengthened.” In the future, it is more likely that there will be a late scenario where US stocks, long-term US bonds, and the US dollar are under pressure at the same time.