Euro falls on surprise French vote

Le Pen: Critical of France's membership in EU

LONDON, England -- The euro slipped against other major currencies on Monday after a surprisingly strong showing by an anti-European Union candidate in the first round of the French presidential elections.

Extreme-right National Front leader Jean-Marie Le Pen beat out socialist Prime Minister Lionel Jospin on Sunday to advance to the second round against incumbent Jacques Chirac on May 5.

The euro, which had been trading at three-month highs against the dollar, fell to 88.84 cents in midday trading on Monday from 88.19 on Friday.

Le Pen, who is an outspoken critic of France's membership on the EU, has campaigned on an anti-crime and anti-immigration platform. His views on immigration and EU membership have strained relations between Le Pen and the European Parliament, of which he is a member.

However, analysts believe Le Pen's victory over Jospin was due more to a low turnout and a limited choice of candidates than a vote against the EU or a single European currency.

They said the negative effect on the euro could have been worse if not for the fact that Le Pen is seen as having little change of unseating Chirac in the next vote.

"The first round of France's Presidential race went with a bang," economists at Bear Stearns said in a note to investors.

"There's little doubt that Chirac will win -- one poll suggests the margin will be 78 percent to 22 percent -- but there might be a few jitters ahead of the second round on May 5."

Also contributing to the euro's weakness was the threat of a strike that could cripple Europe's largest economy.

On Friday, talks broke down between Germany's engineering employers' group and the IG Metall metalworkers' union, clearing the way for a possible strike as early as May 6.

It would be the first major strike in Germany for seven years. The union, which represents 2.8 million workers, rejected a 3.3 percent wage increase over 15 months. It had originally demanded raises of up to 6.5 percent.

Economist believe a wage increase above the level offered by employers would threaten Germany's fragile economic recovery. It would also add to inflation pressure throughout the euro zone, which could lead the European Central Bank to raise interest rates, which could further hamper economic growth.