US Dollar finds safe-haven support as AI shares retreat – MUFG

The US Dollar has recovered its initial post-election losses. MUFG’s Lee Hardman highlights the reversal despite steep declines in AI-related equities. Higher energy prices and record foreign demand for riskier US assets have underpinned the Dollar this year, but a reversal of those trends could put the currency under pressure. A tightening of financial conditions could also make a December Fed rate hike less likely, increasing the Dollar’s downside risks.

US Dollar recovers post-election losses despite AI equity rout

"The spillover impact from the AI-related equity market sell-off into the foreign exchange market has remained surprisingly modest so far."

"It has resulted in the dollar index reversing all of its initial losses since the US mid-term election results were announced."

"US dollar strength this year has been supported by higher energy prices and record foreign demand for riskier US assets."

"If both these drivers continue to reverse, it would increase the likelihood of the US dollar weakening."

"If financial conditions continue to tighten it could make it less likely that the Fed will hike again in December as planned thereby adding to downside risks for the US dollar."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Learn more.)