PARIS, May 30: The euro fell sharply on Monday as traders in the United States came into the market to sell the currency a day after the resounding French rejection of the draft European Union constitution. The euro slipped under the key 1.25-dollar level to a seven-month low of $1.2468 in late afternoon trading, down from $1.2580 late Friday in New York.
The dollar, meanwhile, edged up to 107.94 yen from 107.88. Observers said most of the selling from the United States — despite the public holiday there on Monday — reflected an automatic reaction to the French rejection.
“There are a few more US traders than you would normally expect. They seem to be simply executing orders to sell if the French vote proved to be a ‘no’,” said Paul Bednarczyk at 4CAST. Although Britain and the US were observing public holidays, electronic trading on forex markets continued.
The selling from the US may have also sparked a response from elsewhere. Bednarczyk noted that there was a bit more trading in London than was usual on a public holiday.
A lot of euro sell orders were bunched up at levels around $1.2470. If the euro drops below $1.2460 or so, it may then fall a lot further, Bednarczyk said. In the much-awaited referendum on Sunday, the French electorate voted “no” by a 55 per cent to 45 per cent margin. The news was no surprise and was likely to be followed by a similar result from the Netherlands on Wednesday.
Frederic Pretet at CALYON noted that the 70pc voter turnout in France was key — indicating mobilization of the masses.But as the euro has been under pressure for some time now, it was likely to escape serious damage, he added.
“Lack of visibility on the EU project is likely to add some negative pressure on the euro, although with the euro already down since the beginning of the year against the dollar the risk of a sustainable downward correction appears limited for us,” he added. Both the Hungarian forint and Polish zloty were broadly lower. The Turkish lira, meanwhile, was also down.—AFP
