Euro drops to new low on concern over impact of French ‘No’ vote
Polls show Dutch voters are set to reject the treaty today.
“There’s a belief that the European project is under threat,” said Mark Austin, head of global currency research in London at HSBC Holdings, Europe’s biggest bank by market value.
“There’s no obvious reason why the euro will stop here given that sentiment is so negative.”
The euro extended its slide after French President Jacques Chirac replaced Jean-Pierre Raffarin as prime minister with his former chief of staff, Dominique de Villepin.
The currency weakened to the lowest in more than four months compared with the yen and declined against more than a dozen major currencies, including the British pound and Swiss franc.
Against the dollar, the euro dropped 1% to $1.2351 in New York from $1.2475 the previous day, and touched $1.2310, the lowest since October 13, according to currency-dealing system EBS. The euro may fall to $1.22 in two days, Mr Austin said.
It’s down about 4% in May as reports also showed European growth is trailing the US expansion for a fourth year.
Mr De Villepin “is not exactly going to turn a new leaf”, in terms of economic policy, said Adrian Hughes, a currency strategist at Royal Bank of Scotland.
“It’s going to be more of the same; there is no reason to see it as a positive,” he said.
The dollar remained higher after US industry reports showed Chicago-area business slowed in May, while consumer confidence rose.
Yesterday was the first full day of trading in foreign-exchange markets this week following national holidays in Britain and America.
Hedge funds were among the biggest sellers of the euro, Mr Austin said.
