Finance
Dollar keeps losing market share but euro slow to benefit: ECB study
Published by Global Banking & Finance Review®
Posted on June 11, 2025
3 min readLast updated: January 23, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on June 11, 2025
3 min readLast updated: January 23, 2026
The dollar's market share is declining, with smaller currencies and gold benefiting more than the euro, according to an ECB report.
FRANKFURT (Reuters) -The dollar continued to lose market share as the world's dominant currency last year but mostly smaller rivals and gold benefited rather than the euro, an ECB report showed on Wednesday.
However, an acceleration in the selling of dollar assets since April because of erratic U.S. economic policy provides an opportunity for the single currency, ECB President Christine Lagarde has said, provided the 20-nation bloc finally pushes ahead with key integration steps including joint borrowing.
In 2024 alone, the dollar lost 2 percentage points from its share of global foreign exchange holdings and while the euro made small gains, the Japanese yen and the Canadian dollar were the big winners, the ECB said on Wednesday.
Although the dollar still had a 58% market share of global foreign exchange reserves by end-2024, this is down by 10 percentage points in the past decade. Meanwhile, the euro's share has hovered at just below a fifth.
Another big winner last year was gold, with central banks increasing their stock by more than 1,000 metric tons, a record pace and double the average annual level seen in the previous decade, the ECB said.
"Survey data suggest that two-thirds of central banks invested in gold for purposes of diversification, while two-fifths did so as protection against geopolitical risk," it said.
When all foreign reserves are added together, gold accounted for 20%, and the euro 16%, the ECB added.
However, there have been signs since April that euro assets may finally be benefiting.
Treasury yields have risen but the dollar has weakened sharply against the euro, a highly unusual correlation which appears to suggest that investors are questioning the dollar's status as the world's premier asset and demanding a higher risk premium to hold U.S. assets.
JOINT DEBT
The euro zone, however, lacks a truly liquid, large-scale safe asset since debt is issued by individual countries, leaving the bloc's debt market fragmented unless more joint bonds are issued.
Renowned economists Olivier Blanchard and Angel Ubide recently proposed that European countries create separate revenue streams to repay joint 'blue' bonds and national 'red' ones.
"The conditions today are far more favourable, especially if the scale of blue bond issuance were to be calibrated in a prudent manner," ECB chief economist Philip Lane said on Wednesday.
He also revived his own proposal for a synthetic euro zone bond, effectively a portfolio of different government bonds sold in tranches.
But Europe's banking system is also fragmented and the EU lacks a capital market union with harmonised rules and large, cross-border players.
Moreover, the region lacks military defence capabilities to provide the sort of geopolitical assurance that reserve managers demand.
(Reporting by Balazs Koranyi and Francesco Canepa; Editing by Kim Coghill, Kirsten Donovan)
The ECB report shows that the dollar continued to lose market share, dropping 2 percentage points in 2024, while the euro made only small gains.
According to ECB President Christine Lagarde, erratic U.S. economic policy has created opportunities for the euro to benefit from the dollar's decline.
Gold has emerged as a significant asset, with central banks increasing their holdings by over 1,000 metric tons, primarily for diversification and protection against geopolitical risks.
The euro zone lacks a liquid, large-scale safe asset due to debt being issued by individual countries, which fragments the market unless more joint bonds are issued.
Economists have proposed creating joint 'blue' bonds with separate revenue streams for repayment, as well as a synthetic euro zone bond to enhance market stability.
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