The euro skidded more than half a cent against the dollar today after France soundly rejected the European Union constitution in a referendum, throwing doubts over the political future of the bloc.
The "No" vote garnered 55 per cent, much higher than most polls suggested before the referendum on Sunday.
While the outcome was not expected to jeopardize the monetary union underpinning the euro zone's single currency and the European Central Bank, analysts said it does raise questions about the public support behind the EU and future integration.
"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 forex strategist at JPMorgan Chase in Tokyo.
Still, analysts said the euro's recent slide to seven-month lows versus the dollar had as much to do with investors flocking back to the dollar as the Federal Reserve's steady lifting of interest rates further above those in the euro zone and Japan.
For that reason investors and traders were eyeing reports this week on U.S. manufacturing and the labour market to judge the economy's strength and likelihood of more Fed credit tightening.
"The real reason for the euro's weakness is a growing differential in interest rates between the euro zone and the US," said Osamu Takashima, chief forex analyst at Bank of Tokyo-Mitsubishi.
The euro fell as low as $1.2510 from around $1.2580 in late New York trade on Friday before rebounding to near $1.2540, still down about 0.25 per cent. The single European currency held above a seven-month low near $1.2495 hit last week, just above a key level of technical support at $1.2490, traders said.
The euro slipped slightly against the Swiss franc to 1.5450 and versus the pound to around 68.70 Against the yen, the single European currency fell to lows around 135.20 yen from 135.65.
The dollar also dipped against the Japanese currency to 107.80 yen.
Traders had expected the market reaction to be somewhat limited with dealers in both London and New York out for national holidays on Monday.