By Amanda Cooper
LONDON, July 9 (Reuters) – The United States is relying more than ever on international flows into its companies’ shares than investments in its debt to fund itself, a shift that could make the dollar riskier, Deutsche Bank said in a note on Thursday.
Geopolitical ruptures are deterring investors from owning U.S. debt, while the AI boom means more capital is flowing into U.S. equities, exposing the dollar to the lifecycle of the volatile technology sector, the bank said in the note to clients.
The shift to a more equity-based model of funding the U.S. external deficit means the risk profile of the dollar will change, Deutsche’s strategist Mallika Sachdeva said.
“Demand for U.S. Treasuries has tended to be countercyclical, supporting the dollar in times of recession or risk asset correction. These diversification properties encouraged unhedged dollar exposure. A shift to more cyclical, retail=driven equity funding should make the dollar both more risky and more leveraged to AI,” she said.
The United States has twin deficits, a current account deficit of around $1.12 trillion in 2025 and a trade deficit of around $1 trillion. Attracting foreign flows is central to the government’s ability to fund itself.
Sachdeva’s view echoes that of Reserve Bank of Australia Deputy Governor Andrew Hauser, who earlier this year said the shift into equities from debt marked a move away from the “exorbitant privilege” that allowed the U.S. to borrow as much as it wanted because the dollar was the global reserve currency.
Still, the dollar has staged a remarkable turnaround in value this year. Last year, it fell by nearly 10%, as President Donald Trump’s unpredictable approach to international relations and trade, along with the country’s growing debt burden argued in favour of a longer-term more structural decline in the currency.
The dollar has now recovered almost half of 2025’s decline, lifted by uncertainty from the U.S.-Israeli war on Iran and the likelihood the Federal Reserve will raise interest rates soon, together with record amounts of capital flowing into domestic markets to tap into the AI story.
(Reporting by Amanda Cooper; Editing by Elisa Martinuzzi and Kate Mayberry)
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