A sharp AI-related decline in U.S. shares before year-end could pressure the dollar if American stocks fare worse than international peers, FXStreet reported Oct. 27, citing unnamed TD Securities analysts.
The analysts' reported scenario is that a major equity selloff could change expectations for Federal Reserve policy. Traders might move away from bets on more rate increases and begin to expect cuts. That could narrow the interest-rate gap supporting the dollar and reduce its appeal as a haven, FXStreet said.
The report gave no scale for the potential stock decline, dollar target or estimate of how much currency markets might react. It described a possible outcome before year-end without specifying a trigger.
TD Securities' Sept. 14 currency outlook provides broader context. The firm maintained a negative view of the dollar through year-end and said global equity markets had edged ahead of U.S. stocks during the three months leading up to the report. It separately described a broad-based dollar decline over that period. The firm said sustained dollar weakness would depend on investors keeping an appetite for risk and overseas equities remaining resilient.
TD said a rate increase in the near term could support the dollar. Its September analysis also compared conditions with 2022, when the firm said the Fed took a more hawkish stance than its peers. In 2026, TD described the Fed as catching up with other central banks that had moved rates earlier.
EconoTimes has previously covered questions about AI investment flows and the dollar.
The Federal Open Market Committee (FOMC) raised its target range by 25 basis points Sept. 16 to 3.75% to 4.00%, effective Sept. 17. Its next meeting is scheduled for Oct. 27-28, with the Fed's calendar listing the policy decision for Wednesday, Oct. 28, at 2 p.m. ET (18:00 UTC).
