Emerging Markets Ditch Dollar Dominance—Euro Debt Surges as USD Faces Reckoning

Dollar's throne wobbles as developing nations pivot to euro-denominated bonds.

| The Great Diversification |

Once-slumbering treasuries awake—issuing €50B+ in fresh euro debt this quarter alone. No more begging for USD liquidity at the Fed's mercy.

| De-Dollarization Accelerates |

SWIFT data shows euro usage spiking 32% YoY in EM trade settlements. Meanwhile, dollar reserves shrink faster than a meme coin's liquidity pool.

| The Cynic's Corner |

Wall Street 'strategists' now scrambling to explain why this time isn't like 2015's failed euro challenge—spoiler: they're still wrong.

US Dollar Under Pressure as Euro Debt Gains

Although the euro-denominated bonds make up a small portion of the emerging-market supply against the US dollar, their volume is expected to stay strong. Traders, governments, and fintech firms are eyeing euro bonds more than the US dollar-denominated assets this month. This puts the USD under pressure as traders find other currencies lucrative for profits.

The DXY index, which measures the US dollar’s performance, dipped to a yearly low of 96.5 in early July. The low was sharp that it made the DXY index fall 11.5% YTD at one point. Money managers are now rethinking their strategies by giving euro bonds preferential treatment over the US dollar.

Governments and companies from developing countries have sold €89 billion of euro-denominated debt up until July 2025, according to Bloomberg. The euro issuance has mostly come from Poland and Romania, among other countries. The list also includes China, Chile, and South Korea. The declining demand for the US dollar-denominated debt is worrisome as emerging economies are diversifying their central bank reserves.