AI Trade Reversal Could Undermine Dollar's Safe-Haven Status, Heightening Foreign Capital Outflow Risk

TechFlow reported on Oct. 28 that, according to Jin10 Data, as overseas funds continue to flow into U.S. AI-related equities, corporate bonds and power infrastructure, the link between the dollar and the U.S. tech investment boom has grown increasingly close. Dominic Bunning, Head of FX Strategy at Nomura Securities, said it remains uncertain whether the dollar could benefit from safe-haven demand as it has in the past if the AI trade reverses.

Analysts noted that if AI investment returns fall short of expectations, it could trigger selling of technology assets, widening corporate credit spreads and slower U.S. economic growth, thereby weakening the dollar's yield advantage and support from capital inflows. However, if global dollar funding demand surges, the dollar could still strengthen due to short-term liquidity needs.

Source: TechFlow