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

Higher energy prices and record foreign demand for riskier US assets have supported the US Dollar this year, although a reversal of those trends could put the currency under pressure. MUFG’s Lee Hardman observes that the Dollar has recovered its initial post-election losses despite steep falls in AI-related shares. A further downside risk for the Dollar is that tighter financial conditions could make a December rate rise by the Fed less likely.

Dollar holds firm despite AI equity sell-off

"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.)