Deutsche Bank warns geopolitics and AI are increasing risks to the US dollar

The US dollar has long been the financial world’s security blanket. When markets panic, capital floods into dollar-denominated assets like clockwork. Deutsche Bank thinks that playbook might be breaking down.

George Saravelos, Deutsche Bank’s Global Head of FX Research, warned in a client note that rising geopolitical tensions and heavy AI exposure in US equity markets are undermining the dollar’s traditional safe-haven status. The implication is uncomfortable for anyone with significant dollar exposure: a potential long-term capital rotation away from USD assets.

The AI problem hiding in plain sight

Saravelos’s argument is that the dollar’s fortunes have become so tightly linked to AI-driven growth that the currency now behaves more like a risk asset than a safe haven. Instead of being the thing you buy when you’re scared, the dollar is increasingly the thing you sell when you’re scared.

The AI concentration risk isn’t hypothetical. US equity markets have been heavily weighted toward tech and AI-adjacent companies. When investor sentiment toward AI wavers, even slightly, the ripple effects hit the dollar because so much foreign capital is parked in those same equities.

Geopolitics as an accelerant

Deutsche Bank’s macro outlook from June 24, 2026 highlighted AI and geopolitical tensions as the two dominant forces shaping economic forecasts through 2026.

Ongoing developments in the Middle East and broader global instability have traditionally sent investors running to the dollar. But Saravelos’s analysis suggests that dynamic is weakening. If geopolitical disruptions could simultaneously hurt the AI trade and weaken the dollar, then holding dollars isn’t hedging your risk.

The result, according to Deutsche Bank, is heightened incentives for investors to reduce their dollar exposure — a gradual, structural shift that reshapes capital flows over quarters and years.

What this means for investors and crypto

Deutsche Bank itself has acknowledged the connection between a weakening dollar and alternative assets. In a separate report from September 2025, the bank posited that Bitcoin could join traditional assets like gold as a hedge in central bank reserves.

Saravelos is describing a long-term rotation, not a weekend event. The dollar doesn’t lose reserve currency status because one bank publishes a bearish note. These shifts play out over years, sometimes decades. The British pound’s decline from global dominance took the better part of a century.

For crypto specifically, the key variable is whether institutional allocators treat digital assets as a legitimate destination for this rotation or continue to view them as too volatile for reserve-style holdings. Deutsche Bank’s willingness to discuss Bitcoin in the context of central bank reserves suggests the institutional Overton window is shifting, even if slowly.