Euro takes tumble after No vote

THE EURO tumbled to a seven-month low against the dollar today as France's rejection of the European Union constitution compounded worries about the eurozone's struggling economy.

With the Netherlands also poised to reject the new constitution tomorrow, the single currency dropped as low as $1.2371 - a level not seen since last October.

The euro's sharp fall also dragged down sterling to a seven-month trough of $1.8107.

'The French vote has just added one more reason to dump the euro on top of the weak eurozone economy and inferior interest rate outlook,' said one trader.

City bookies predicted France's main stock market index, the CAC 40, would open about 10 points lower.

A further drop in the euro would hit hopes of an early cut in interest rates by the European Central Bank. The Organisation for Economic Co-operation and Development called for a cut in the ECB's 2% rate last week to lift the eurozone's flagging economy, which it said would grow by only 1.2% this year.

French President Jacques Chirac moved to limit the political damage today by replacing Jean-Pierre Raffarin as Prime Minister with former foreign minister Dominique de Villepin.

However, most analysts said that talk of apocalypse for the European economy and financial markets had been overdone. 'The European Union is not a rubble-strewn wasteland,' said Rob Carnell, an economist at ING. 'In the short-term, there are relatively few direct economic implications from this result.'