GRAPHIC-Euro slump spreads far and wide vs trading peers

This time it's different. Unlike recent surges, the dollar's ongoing advance may be handing Europe an export advantage, by driving the euro to three-year lows against trade partners' currencies.

A weakened euro has frequently irked U.S. President Donald Trump, who grumbles that a "devalued" euro gives the region's exporters an unfair advantage. But those claims did not usually stack up, because previous dollar rallies did not see the euro tumble on a trade-weighted basis. Now, though, the dollar is flexing its muscles, just as the global newsflow, economic data, and options market positioning are working against the euro.

An index compiled by the European Central Bank and closely tracked by policymakers shows that this month's fall on a trade-weighted basis has taken the euro back to its levels of April 2017. It is down 2 percentage points this year, the biggest move since 2015. The move is all the more striking because of shifting trade patterns, which have swelled emerging-market currencies' share in the trade-weighted basket at the expense of the dollar. China's yuan accounts for around 23%, almost tripling since 2003, while the dollar's weight has shrunk to 17% from 22%.

The euro has lost 2.7% of its value against the Chinese offshore yuan since the start of the year, and 2.2% versus the Swiss franc. European politicians will - privately at least - welcome the euro's trade-weighted drop - the stuttering German economy clearly needs a boost for its exporters.

But the weakness may raise hackles in Washington and Bern -- currency markets will be on red alert for any comments from Trump.