Euro Dips After French Reject EU Constitution

The euro fell slightly against the dollar and yen in Asia in early trading today after French voters rejected the European Union constitution.

The legislation was aimed at streamlining decision-making after the EU’s expansion last year to 25 members. The euro has dropped 2.8% this month as polls showed ebbing support for the constitution and reports indicated the region’s economy was struggling to grow.

“This will drag the euro lower,” said David Mozina, head of foreign-exchange research at ABN Amro Holding NV in Sydney, Australia. “There are already stark differences on the economic side between the euro zone and the U.S.”

The euro fell to $1.2510 against the dollar in Tokyo early today, down from $1.2584 late Friday in New York, according to the electronic currency-dealing system EBS. The currency is down 8% from a record $1.3666 on Dec. 30.

Sunday’s vote was not expected to jeopardize the monetary union underpinning the euro zone’s single currency or the European Central bank.

“The French referendum does not mean the end of the euro. It just shows there are a lot of things the European Union should do for it to develop further,” said Tohru Sasaki, chief foreign exchange strategist at JPMorgan Chase in Tokyo.

“The market had already priced in ‘no’ vote,” he said. “I think it’s time to buy the euro.”

But Guy Stern, who oversees $17.8 billion in assets as chief investment officer of Credit Suisse Asset Management’s German business in Frankfurt, said Sunday’s vote gave investors disappointed by Europe’s economy another reason to sell the euro.

“It could depreciate 5% to 10%,” he said.

Traders had expected the market reaction to be limited, with markets in London and New York closed for holidays.