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LivestreamMenuGeopolitical ruptures and the tech equity boom is making the dollar “riskier and more leveraged to AI,” according to Deutsche Bank analysts. An “important long-term rotation” is underway in how the U.S. funds its deficit and that could have major consequences for the risk profile of the greenback, Deutsche’s forex strategists wrote in a note published on Thursday. “Geopolitical ruptures have been hurting long-term appetite for USD debt by the foreign official sector,” the analysts wrote. “This could deepen as the world builds strategic autonomy in areas from defence to energy which may necessitate a draw on savings held in USD. At the same time, technology has been pulling enormous equity capital into the U.S. by other types of foreign investors like retail.” “The gap between net equity flows to the U.S. increasing, and debt flows falling, has never been wider,” Deutsche added. GBP= EUR=,JPY= YTD mountain USD performance year-to-date. The German lender notes a growing divergence between the nation’s weakening fiscal position and its thriving corporate balance sheets. The strategists think AI could accelerate this discrepancy as companies get richer and the redistributive pressures on governments grow. As a result, the German lender sees the potential for the dollar to shift from debt-based to equity-based funding, which makes it “both more risky and more leveraged to AI.”Read More
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