The dollar’s traditional status as a haven asset should not be taken for granted during an AI-driven market correction, according to Deutsche Bank AG.

The risks to the dollar “are a lot more two-sided than the market has been pricing over the last few weeks,” said George Saravelos, the bank’s global head of FX strategy, in a note to clients Friday. Recent episodes of simultaneous weakness in tech stocks and the greenback support that view, he added.

One reason for that is the unprecedented scale of foreign exposure to US stocks. Saravelos said overseas investors currently finance the entire US current-account deficit. But their holdings have grown through valuation gains rather than fresh buying — Deutsche Bank estimates about 90% of the more than $20 trillion in US equities held by foreigners reflects price appreciation.

Another key factor, according to Saravelos, is equity-hedging dynamics. Over the past decade, US stocks and the greenback had an inverse correlation, providing a huge incentive for currency risk to be left unhedged. But when an equity shock is US-driven, that relationship flips to positive, with the dollar falling alongside stocks and adding to equity losses for foreign investors.

A further confirmation of the dollar losing its risk-off properties would be a simultaneous decline in US real yields and equities. Saravelos argues that the rise in both rates and stocks this year has been tied to stronger expectations for AI-related capital spending.

“A move lower in both US real yields and equities would be consistent with these expectations being downgraded,” he noted.

Saravelos said that while he isn’t making a call on the outlook for the AI ecosystem, the changing relationship between risk assets and the dollar deserves more attention. “The AI dollar is here,” the report said.