Currency strategist who incurred Bessent's wrath exposes safe-haven myth of the dollar

By Jules Rimmer

Deutsche Bank's global currency strategist is bearish on the dollar

Deutsche Bank's Saravelos thinks U.S. exceptionalism no longer works as a driver for the U.S. dollar

The Deutsche Bank strategist who last month provoked the ire of Treasury Secretary Scott Bessent now says the dollar's safe-haven status is a myth.

In January, Deutsche Bank's global forex strategist, George Saravelos roused the ire of Bessent by suggesting Europeans might sell their holdings of U.S. Treasurys after Trump imposed punitive tariffs on them. Deutsche Bank's CEO, according to Bessent, said he didn't agree with Saravelos' opinion.

Saravelos now is taking on the status of the mighty U.S. dollar.

Instead of rallying during periods of risk aversion, a chart of the dollar's DXY relationship with equities SPX demonstrates, according to Saravelos, this not to be true.

The dollar is not a safe-haven on average

Saravelos points out that over the past year the dollar has de-correlated from the S&P and goes on to explore the explanation, and implications, of this trend.

Saravelos' chief contention is that the U.S. stock market has become more risky - mostly owing to concentration in the AI sector and fears of cannibalization - while the rest of the world, benefiting from easier fiscal policy and low oil prices, looks comparatively attractive.

If the source of any equity market negativity is in the U.S., then Saravelos reckons it's "entirely possible for the dollar to fall as equities are going down, just like the 2002 dot-com period."

Saravelos' observation is valid over longer time horizons going back to the 1980s. If the U.S. market gets riskier, the dollar no longer works as a safe-haven.

The safe-haven theory falls down if the U.S. stock market is perceived as riskier

For Saravelos, the single most important driver about forex hedging decisions is this backward-looking relationship between the dollar and U.S. stocks. If the dollar is unattractive as a portfolio hedge, the more incentive there is to reduce dollar exposure.

Deutsche Bank has maintained a dollar-bearish view for a while, predicated on its declining exceptionalism in terms of its comparative yield advantage, growth prospects and that safe-haven reputation. More appealing to Saravelos in the present environment are those currencies benefiting from relatively benign global growth dynamics like the Australian dollar (AUDUSD) , Scandinavian and emerging-market currencies.

-Jules Rimmer

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02-12-26 0435ET