The euro held near a seven-month low against the dollar on Wednesday, although more selling of the European currency was expected after a Dutch vote later in the day that will likely reject the EU constitution. While traders don't expect selling of the same magnitude that sent the euro tumbling after France rejected the treaty at the weekend, market concerns have been heightened about a euro zone economy already hit by a slowdown in growth.
"I don't expect the same kind of sharp euro selling after the Dutch vote, but as sentiment remains weak, it is possible the euro could extend losses," said Tohru Sasaki, chief forex strategist at J.P. Morgan Chase.
Forecasts suggest the outcome will be a resounding "No".
Sounder growth prospects in the United States and expectations for more rises in US interest rates have also bolstered the dollar, although a recent run of upbeat indicators out of Japan has kept a lid on the currency against the yen.
The euro bought around $1.2320, recovering from the day's low of $1.2298.
That was just shy of a seven-month low of $1.2296 struck in New York in a delayed reaction to the French "No" vote as US traders returned to the market after a holiday on Monday.
The dollar hovered around 108.30 yen after the euro's plunge against the dollar drove the US currency to a six-week high of 108.58 yen on Tuesday.
The euro was at 133.40 yen after sinking on Tuesday to 133.08 yen, its lowest level since mid-January.
The single European currency, which has shed over 5 percent against the dollar in less than a month, came off its session low as traders locked in profits from the US currency's recent gains.
Market players said that in addition to profit taking, traders covered short euro positions against a stack of currencies such as sterling and the yen, which contributed to a volatile trading session.
While the euro's downtrend was clear, traders were less certain about the direction of the yen against the dollar.
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