Analysis: US Financing Edge Eroded as Asia Shifts to Euro-Denominated Borrowing

This analysis is based on the Bloomberg report via Yahoo Finance [1] and Reddit discussions, investigating the trend of Asia moving toward euro-denominated borrowing. In 2025, Asia Pacific euro-denominated bond issuance rose 75% to €86.4 billion, with the euro’s share of Asia’s total (dollar + euro) cross-border issuance reaching a record 23%—up 6 percentage points from 2024 [1]. The US dollar slid 11% against the euro in 2025, reflecting reduced investor confidence [1]. Key drivers include President Trump’s trade tariffs and pressure on the Federal Reserve to cut interest rates despite inflation concerns [1], coupled with geopolitical uncertainty surrounding US leadership, which market participants cite as a major factor [1]. Asian borrowers are actively diversifying away from USD concentration, viewing euro diversification as a strategic imperative beyond routine refinancing [1]. Lower funding costs (near-five-year low swap premiums for euro-to-dollar swaps) and strong global investor demand for euro assets also fuel the trend [1]. Notable issuances include China’s oversubscribed €4 billion bond (attracting bids over €100 billion) and NTT Inc.’s €5.5 billion offering—2025’s largest Asian corporate euro issuance [1]. Reddit discussions highlight bearish views on USD reserve status due to US policies [0], while noting the EU’s lack of fiscal union limits the euro’s potential to fully replace the USD [0].

1. Policy-Geopolitical-Capital Flow Link
   : US domestic policies (tariffs, Fed pressure) and geopolitical uncertainty are directly influencing global capital allocation decisions, pushing Asian borrowers toward the euro as a more stable alternative.
2. Strategic Diversification Over Cost Alone
   : While lower funding costs are a factor, the trend reflects a broader strategic shift by Asian entities to reduce USD concentration risk, indicating a potential long-term structural change rather than a temporary cost-driven blip.
3. Multipolar Landscape Emerging
   : The surge in euro borrowing suggests the global financing system is moving toward greater multipolarity, even as the USD retains its dominant 63% share of cross-border bonds [1].
4. EU Fiscal Union Constraint
   : The euro’s growth as a global financing currency is limited by the EU’s lack of a fiscal union, which prevents the creation of a centralized, stable debt market comparable to the US [0].

• Temporary Trend Uncertainty
  : It remains unclear whether the surge in euro borrowing is a short-term response to current US policies or a long-term structural shift.
• USD Devaluation Risk
  : Unsustainable US debt could lead to USD devaluation, potentially accelerating reserve currency shifts, though this is a low-probability risk currently [0].
• EU Fiscal Limitations
  : The euro’s inability to fully replace the USD due to the EU’s lack of fiscal union may cap its growth as a global financing currency.

• Euro’s Growth Potential
  : The trend positions the euro as a viable alternative to the USD in global financing, with forecasts of $125 billion in Asian euro-denominated issuance in 2026 (a 20% gain) [1].
• Diversification Benefits
  : Asian borrowers and global investors benefit from reduced concentration risk by expanding into euro assets.

• 2025 Asian euro bond issuance surged 75% to €86.4 billion [1].
• Euro’s share of Asia’s cross-border (USD + euro) issuance reached a record 23% [1].
• USD slid 11% against the euro in 2025 [1].
• Key drivers: US policies/geopolitical risk, diversification, lower euro funding costs, investor demand [1].
• Notable issuances: China (€4B oversubscribed), NTT (€5.5B, 2025’s largest) [1].
• 2026 forecast: $125 billion in Asian euro issuance [1].
• EU’s lack of fiscal union limits euro’s potential to replace USD [0].
• USD remains dominant (63% of global cross-border bonds) [1].