AI TRENDS | Capital Economics: Dollar Faces Greater Pressure if AI Stock Selloff Deepens

Capital Economics said the dollar could face greater pressure if the technology-stock selloff intensifies, contrasting with its performance during previous market crashes. According to Sina Finance, the firm’s Asia-Pacific market head, Thomas Mathews, wrote that the stock-market beneficiaries of the AI boom are highly concentrated in the United States, even compared with the U.S.-led internet bubble, and that foreign investment in U.S. equities is near a record high, supporting the dollar during the rally. Mathews said a deterioration in sentiment toward AI would pose a significant risk to the dollar, while worsening U.S. fiscal conditions, changes in relative yields, and central banks’ potential responses to an AI bubble bursting have also somewhat weakened the dollar’s safe-haven status. He said these factors suggest the dollar’s turning point could resemble that of U.S. stocks, and that even if both eventually rebound, they may face larger declines before long.