A sell-off in artificial intelligence stocks could leave the US dollar falling alongside equities, rather than rising as a haven, Deutsche Bank has warned. The shift could expose overseas investors to losses on both their US stock holdings and their dollar positions, while also affecting dollar-priced assets such as bitcoin and gold. On Friday, October 30, the dollar was steady as US stocks, gold and bitcoin all fell, showing no single, consistent haven pattern in the market.
Foreign investors hold more than $20 trillion in US stocks
George Saravelos, Deutsche Bank’s global head of FX research, said in a client report that foreign investors hold more than $20 trillion in US equities. The bank estimates that about 90% of the value of those holdings reflects share-price gains, rather than the underlying positions built through continued net buying by foreign investors.
Saravelos said foreign allocations to US equities have become an important source of financing for the country’s current-account deficit, which measures when a country’s external spending exceeds its income from abroad. A sharp fall in US share prices could therefore affect more than equity valuations: it could also put pressure on overseas investors’ dollar exposure.
Why the dollar may not rise when stocks fall
Over the past decade, US stocks and the dollar have often moved in opposite directions: investors have bought dollars when risk assets fell, giving the currency a haven role. Some overseas investors consequently left their dollar exposure unhedged, expecting dollar gains to offset part of any losses in their US equity holdings.
Deutsche Bank said that cushion could fail if a shock originates in the US. If foreign investors respond to falling stocks by increasing their currency hedges, they would need to sell dollars. A wave of such hedging could add to downward pressure on the currency, leaving investors exposed to both falling equity valuations and a weaker dollar.
The 2025 tariff shock offers a precedent
A similar pattern emerged in April 2025, when the dollar fell after Donald Trump announced tariff measures. Research by the Bank for International Settlements found that foreign investors’ currency-hedging activity intensified the decline. Deutsche Bank cited the episode to illustrate that the familiar “stocks down, dollar up” relationship is not guaranteed when a market shock comes from the US and overseas investors adjust their dollar exposure.
Dollar moves also feed into the pricing of other assets. Bitcoin and gold are both priced in dollars, and both rose in August as the dollar fell and expectations of Federal Reserve rate cuts increased. But on Friday, October 30, the dollar held steady while bitcoin, gold and equities all declined. Short-term prices remain influenced by multiple factors; Deutsche Bank’s warning describes a scenario in which an AI stock sell-off could alter the dollar’s haven behavior, not a certainty that these assets will move together.