Global financial markets—particularly in the Asia-Pacific region—are witnessing a structural shift in international financing patterns, reflected in a gradual move away from the U.S. dollar toward increased reliance on euro-denominated issuance. This development underscores a complex interplay between geopolitical dynamics, funding-cost considerations, and strategic efforts to diversify financial exposure.
1. Shifts in the Structure of International Financing
Recent data compiled by Bloomberg indicate that the share of euro-denominated bonds issued by Asia-Pacific borrowers rose to 23% of total euro- and dollar-denominated issuances in 2025, marking a record high and an increase of six percentage points compared with 2024. Euro bond sales surged by 75% to reach €86.4 billion, signaling exceptional growth in demand for this funding channel.
Despite the U.S. dollar’s continued dominance in global financial transactions, its relative market share has declined. Although dollar-based borrowing by Asian issuers rose by 29% this year, it did not keep pace with the rapid expansion of euro issuance, leading to a relative erosion in the dollar’s weight within global financing portfolios.
2. The Role of Geopolitical Factors and U.S. Economic Policy
This shift can be partially explained by the economic and trade policies of the U.S. administration under President Donald Trump, including the imposition of broad tariffs and political pressure on the Federal Reserve to cut interest rates despite persistent inflationary pressures. These policies have amplified uncertainty in financial markets and weakened confidence in the dollar as a stable funding instrument.
This instability contributed to an 11% decline in the dollar’s value against the euro, prompting many investors and financial institutions to reassess their asset allocations and redirect more funds toward euro-denominated assets.
3. Funding-Cost Considerations
Beyond geopolitical influences, the cost of funding has played a decisive role in this transformation. Data show that the euro-dollar swap spread has fallen to its lowest level in nearly five years, making euro borrowing cheaper than borrowing in dollars—or even in some local currencies—for a range of Asian borrowers. As a result, the euro has become an increasingly attractive financing option from both an economic and financial perspective.
4. A Broader Economic Interpretation: Toward a Multipolar Financial Order
Although predictions about the decline of the U.S. dollar have surfaced repeatedly, historical data demonstrate the currency’s significant resilience and long-term global ascendancy. According to the Bank for International Settlements, the share of dollar-denominated bonds issued by non-U.S. borrowers rose to 63% by mid-2025, up from 43% in 2007.
Nevertheless, several experts—including Martin Schulz of Fujitsu—argue that the current rise in euro issuance does not constitute a direct threat to the dollar's global status. Instead, it represents a “normalization” process following years of unusually high dependence on dollar-based financing. These analysts contend that the global financial system is gradually moving toward a more multipolar configuration rather than toward a wholesale replacement of the dollar.
5. Empirical Evidence of the Shift: Asia and Russia
The European markets this year recorded several major transactions that underscore the euro’s growing role in Asian financing. Notable examples include:
A 4 billion euro bond issuance by the Chinese government, which attracted over €100 billion in investor demand.
A 5.5 billion euro issuance by Japanese telecommunications giant NTT, the largest euro-denominated corporate issuance from Asia in 2025.Meanwhile, Russia completed its first sovereign issuance of yuan-denominated bonds totaling 20 billion yuan—a move driven by Moscow’s desire to diversify its funding sources and reduce reliance on the U.S. dollar amid mounting Western sanctions.
Conclusion
These developments point to a gradual reconfiguration of international financing dynamics, as major and emerging economies seek to diversify their funding instruments and reduce their unilateral dependence on the U.S. dollar. While the dollar remains indispensable in the short term, the growing use of the euro and the yuan signals the emergence of a more balanced, multipolar global financial system—shaped by economic considerations, geopolitical shifts, and increasingly favorable financing conditions.
source: Bloomberg
Japan’s Largest Stimulus Since the Pandemic: A Bold Economic Step by Sanae Takaichi’s Government