Emerging Markets Favor Euro Debt as Dollar Weakens

Borrowers in emerging markets are increasingly turning to euro-denominated bonds, capitalizing on the US dollar's decline. Euro debt issuance has reached its fastest pace in a decade, fueled by investor demand for diversification and attractive yields. The shift reflects broader currency trends, with the DXY index hitting a yearly low of 96.5 in early July—an 11.5% year-to-date drop at its weakest point.

Stefan Weiler of JP Morgan notes the euro's 9.5% appreciation against the dollar this year creates favorable conditions for euro-denominated debt. While still a minority of emerging market supply, euro bonds are gaining traction among governments, traders, and fintech firms seeking alternatives to dollar assets. Developing nations have already issued €8 billion in euro bonds this year, signaling sustained momentum.