Updated from May 29
The euro fell against major foreign currencies Monday after French voters rejected the European Union constitution in a weekend referendum.
Final tallies show about 55% of French voters rejected the charter in heavy turnout on Sunday. EU officials have said they had "no backup plan" in case of rejection, although they have about 16 months to weigh alternatives and could eventually propose another vote in France.
The constitution, part of a process to strengthen the unity of Europe, must be approved by all 25 EU members for it to go into effect in late 2006. So far nine other countries have accepted the charter, either by referendum or parliament. Germany was the latest Friday.
Opinion polls in France in recent weeks had given the edge to a "no" vote, as many French citizens were concerned about losing their identity in a stronger Europe and unsure whether the complicated document serves France's best interests -- even though the country helped found the EU and former President Valery Giscard d'Estaing was a key architect of the charter. The defeat is also a blow to President Jacques Chirac, who had supported the constitution.
While the rejection could create volatility in the currency markets this week, how the markets will react "is a bit more complicated than simply selling the euro," says Marc Chandler in his
French EU Vote Is Not So Simple." In fact the market may not be surprised by the no-vote, he says.
Nevertheless, the euro fell against major currencies in European trading Monday. The euro recently fetched $1.2502 in London, down from $1.2584 late Friday in New York and bringing to about 3% its decline this month against the U.S. currency. Trading volume was lower amid the Memorial Day holiday in the U.S.
The euro bought 134.83 yen Monday, down from 135.79 Friday.
The next country to vote on the constitution will be the Netherlands on Wednesday, where recent surveys show that ratification is doubtful.