Global Shifts in Currency Power

It’s been a tough year for the U.S. dollar. The major fiat currency has declined against almost every major counterpart. In the traditionally safe-haven USD/JPY pair, the US dollar is down approximately 8.5%, while in the highly liquid USD/EUR pair it’s dropped more than 10%.

These declines are the result of significant recent geopolitical shifts. Discussions about the sustainability of USD and its efficiency as the world’s primary trading currency are now being raised acoss the globe.

Europe

The president of the European Central Bank, Christine Lagarde, recently suggested that the euro could one day replace the dollar as the world’s primary reserve currency. This ambitious vision is based on the gradual but persistent weakening of the dollar, due to all the recent economic uncertainties plaguing the U.S., and the increasing use of alternative currencies, mostly among the BRICS countries.

However, despite the euro’s recent strength against the U.S. dollar, it suffers from major handicaps such as fragmentation of financial markets, the absence of a safe European asset comparable to U.S. Treasuries, and a lack of proper political integration across member states.

Without a stronger fiscal unity and more coherent geopolitical coordination, the euro may remain a powerful regional currency rather than a credible global contender. Lagarde also acknowledged that the stability of the currency is closely tied to the strategic and soft power of its issuer.

For the euro to truly compete, the European Union must evolve into a key geopolitical player, capable of defending its interests, protecting its members, and forging influential global partners.

This transformation would require enhanced higher military autonomy, strong trade partnerships, and innovations such as a digital euro. Without a truly united and more sovereign Europe, the euro is unlikely to rival dollar’s global dominance.

Eurasia and South America

The BRICS nations pose a significant challenge to both the dollar and any hypothetical euro-led financial order. These countries are actively working to reduce their reliance on the U.S. dollar by promoting payments in local currencies and developing parallel financial systems.

Representing over a third of the global economy, the BRICS bloc has little incentive to replace the U.S. dollar with any other Western currency. China is pushing for the widespread internationalization of the yuan, while the BRICS as a group are exploring the creation of a shared currency.

In this complex context, the euro risks being squeezed between a still-resilient dollar and the rise of non-Western alternatives.

Worldwide crypto

In the long term, it may not be the euro or the yuan that replace the dollar, but decentralized cryptocurrencies. If the dollar were to collapse, BRICS countries and others could ultimately turn to crypto — not as a tool of Western financial influence, but as a means of bypassing it altogether.

Photo by Nataliya Vaitkevich: