The euro slid to its lowest level against the dollar in over seven months on Monday after French voters rejected the European Union constitution, throwing doubts over the political future of the bloc.The “No” vote garnered 55 per cent, higher than most polls suggested before the referendum on Sunday.The euro fell 0.8 per cent to $1.2471, its lowest since October, after hitting automatic sell orders on the break of chart support at $1.2590. Trading volumes were thin with markets in Britain and the United States closed for national holidays.“It has to be pinned down to the French no vote,” said Niels Christensen, senior currency strategist at Societe Generale in Paris. “Some stops were taken out which caused the euro to fall further.”While France’s rejection of the EU treaty was not expected to jeopardize the monetary union underpinning the single currency, it did raise questions about public support behind the EU and future integration.It also plunged France into political turmoil just a week after Germany’s Chancellor Gerhard Schroeder called for early elections after his party suffered humiliating defeat in a regional poll.“A no vote was expected but the size of the rejection will cause a government crisis in France,” said Armin Mekelburg, currency strategist at Hypovereinsbank in Munich.The euro was down 0.85 per cent against the yen, at 134.65, and was underperforming both the Swiss franc and British pound.European Commission President Jose Manuel Durao Barroso said France’s rejection of the European constitution was a serious problem and risked affecting the charter’s ratification chances elsewhere.Dutch voters go to the polls on Wednesday amid widespread expectations for another “no” verdict. Analysts pointed out that political uncertainty in the euro zone was rising at a time when the economy was showing increasing signs of weakness.Data last week showed German business confidence at its lowest in almost two years and industry groups are calling on the European Central Bank to cut interest rates to stimulate sluggish domestic demand. “There is still a lot of uncertainty going forward about what will happen to the constitution. It is unfortunate for the euro that this difficult political situation is coinciding with a difficult economic situation,” said Richard Batley, an European economist. —Reuters
