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Dominic Bunning, Nomura's head of G10 FX strategy, warned that if the AI trade reverses, it is far less certain that the dollar will benefit as it has in the past. He noted that large-scale inflows of foreign capital into US mega-cap tech stocks, cloud computing corporate bonds and power grid infrastructure have made the dollar a concentrated bet on "American exceptionalism"; during last week's pressure on AI valuations, safe-haven flows went noticeably to the yen and the Swiss franc rather than the dollar. Erik Nelson of Wells Fargo, meanwhile, argued that what would trigger a deep dollar correction is not a decline in tech stocks, but whether the stress escalates into US-specific credit and growth problems, at which point the yen would most likely be the biggest beneficiary.
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Nomura: The Biggest New Risk for the Dollar Is an AI Funding RetreatDevelopments
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Oct 28
Wall Street See
Nomura: The Biggest New Risk for the Dollar Is an AI Funding Retreat
Dominic Bunning, Nomura's head of G10 FX strategy, warned that if the AI trade reverses, it is far from certain that the dollar would benefit as it has in the past. Large-scale inflows of foreign capital into U.S. mega-cap tech stocks, cloud computing corporate bonds and power grid infrastructure have made the dollar a concentrated bet on "American exceptionalism"; during last week's pressure on AI valuations, safe-haven flows went noticeably to the yen and the Swiss franc rather than the dollar. Erik Nelson of Wells Fargo believes the key trigger for a deep dollar correction is not a decline in tech stocks, but whether the stress escalates into U.S.-specific credit and growth problems, at which point the yen would most likely be the biggest beneficiary.
Cailian Press
Wall Street Warns of Dollar's "False Safe Haven": If the AI Narrative Collapses, Global Capital Could Stampede for the Exits
Dominic Bunning, head of G10 FX strategy at Nomura Securities, and other Wall Street figures warn that the dollar is increasingly becoming a price-sensitive crowded trade as overseas capital chases the AI wave; once cracks appear in the AI growth narrative, its status as a safe-haven asset will conflict with its role as a risk-sensitive asset. Erik Nelson of Wells Fargo noted that the dollar's real trade-weighted index has been above its long-term average for 12 consecutive years, the longest streak since 1973; foreign inflows are concentrated in US equities and corporate bonds, and an unwinding wave could hit US stocks, the bond market and interest rate expectations simultaneously. CDS spreads of highly indebted computing power companies such as CoreWeave have surged sharply in recent weeks, seen as a signal that the peripheral line of defense is loosening.