Euro falls but remains
strong against dollar

FRANKFURT, Germany >> The euro slid to its lowest level against the U.S. dollar since October, dropping below $1.25 yesterday after French voters rejected the European Union constitution.

The "no" from French voters created uncertainty about European integration and could lead international investors to become more wary of putting money in European assets.

In afternoon European trading, the 12-nation euro fell as low as $1.2466 before climbing back a bit to $1.2469 -- still well below the $1.2575 it bought in New York late Friday. The dollar was last below that level on Oct. 16, when a euro bought $1.2394.

The euro remains strong overall, however, having risen from 82 U.S. cents in October 2000 on concerns about the U.S. trade and budget deficits.

The British pound was down to $1.8226 from $1.8228 on Friday. The dollar rose slightly against the Japanese yen, climbing to 107.93 yen from 107.84 yen.

While France's decision Sunday to reject the EU constitution gave the dollar a lift, a "no" vote had been widely anticipated -- protecting the euro from a steeper plunge.

"The French 'no' did not come as a surprise for market participants," said Joerg Kraemer, chief economist at HVB Group.

Still, French voters dealt the constitution its first rejection, with opponents winning by nearly 10 percentage points. The treaty faces another tough test when the Netherlands votes tomorrow, and polls show even more resistance there. Nine countries including Germany have approved the document -- mostly through parliamentary votes.

But analysts said any uncertainty was unlikely to affect the currencies of the 10 new members of the EU as they strive to adopt the euro over the next several years.

"It is not a catastrophe for central European markets, especially since -- apart from some foggy market deliberations -- it's difficult to find a direct link between the European Constitution and what will be happening, for example, with Poland's entrance into the euro zone," said Marcin Mroz, chief economist for Warsaw, Poland-based SG Bank.

Some economists noted that troubles in the European economy other than the constitution could be weighing on the euro -- economic weakness in Germany and Italy, in particular, that has hampered euro-zone growth.

"While many commentators suggest that recent euro weakness is primarily a function of uncertainty surrounding the French referendum on the proposed EU Constitution, we find the euro weakness entirely consistent with cyclical developments," said Robert Sinche of the Bank of America.