LONDON - The euro slumped to a new seven month low point against the dollar on Tuesday after President Jacques Chirac appointed Dominique de Villepin prime minister of France after the country soundly rejected the EU constitution.
The single European currency fell to 1.2311 dollars in early European trading -- the lowest level since October 14 -- from 1.2468 late on Monday in New York.
The dollar stood at 108.03 yen, from 107.96 on Monday.
Chirac appointed Villepin Tuesday in a major government reshuffle in the aftermath of the country's massive rejection of the EU constitution at the weekend.
Villepin, the 51-year-old former foreign minister who earned a worldwide reputation for his impassioned defence of France's opposition to the US-led war in Iraq, replaced the deeply unpopular Jean-Pierre Raffarin.
"From a market perspective, Villepin is hardly a surprise but those hoping for a more aggressive reform agenda for the next two years preceding the 2007 (French) presidential elections... could prove disappointed by" Chirac's appointment, said Audrey Childe-Freeman, economist at the Canadian Imperial Bank of Commerce.
Chirac said he would give a "new and strong impulse to government action" after French voters decisively turned down the landmark EU charter with nearly 55 percent casting "no" ballots Sunday.
"There is a risk that the latest political debacle brings greater investor focus on serious underlying structural problems facing the eurozone," HBOS economist Steve Pearson said.
European bonds meanwhile rose slightly on Tuesday, causing yields to decline.
The benchmark 10-year German Bund saw its yield fall 0.03 percentage points to 3.30 percent.
Long-term bond yields, determined on financial markets, set the tone of long-term interest rates. Central banks set the tone for the interest rate environment in the short term.
The euro was changing hands at 1.2311 dollars against 1.2468 late on Monday in New York, 0.6794 pounds (0.6838) and 1.5399 Swiss francs (1.5446).
The dollar stood at 108.03 yen (107.96) and 1.2474 Swiss francs (1.2347).
The pound was being traded at 1.8180 dollars (1.8234), 196. yen (196.81) and 2.2666 Swiss francs (2.2474).
On the London Bullion Market, the price of an ounce of gold stood at 417.45 dollars against 418.25 dollars late on Monday.
05/31/2005 11:18 GMT