The euro remained soft against the dollar as sentiment in the single currency continued to be dented by the breakdown of last Friday's summit of European leaders and moves in Italy to call a referendum on bringing back the lira. The EU summit descended into acrimony on Friday night when British Prime Minister Tony Blair held firm against French-led demands for a reduction in the 3 bln stg "cheque britannique", meaning an agreement on the EU budget for the years 2007-13 could not be reached. The euro plunged to near nine-month highs in recent days as investors fret about the political future of the EU following the rejection of the EU constitution by both France and the Netherlands and the debate about the budget. There are also concerns that Italy's Northern League party may gather the necessary 500,000 signatures required to force a referendum on re-introducing the lira.Though the campaign is not supported by Italian premier Silvio Berlusconi, it reportedly has the backing of two Northern League Cabinet members, Roberto Calderoli, Minister of Reform, and Roberto Maroni, Minister of Welfare. Despite these ongoing concerns about the future of the EU and EMU, a number of analysts think the political woes may take a backseat for now. "Political and structural euro negatives look set to take a back seat this week as generalised pressure on the dollar re-emerges," said Steve Pearson, currency strategist at HBOS, noting the surge in oil and commodity prices. Investors will be interested to see what impact record oil prices will have on currency markets. Traditionally, high oil prices have impacted on the yen as Japan is a net importer of oil and dented confidence in the dollar by diminishing expectations of further US interest rate hikes. Oil prices surged to a record high overnight in Asian trading, with the benchmark New York contract climbing past 59 usd a barrel. In addition, analysts warned that this week's data flow may work against the dollar. Mark Austin, global head of currency strategy at HSBC, thinks the US currency is "vulnerable" to disappointing news especially as the recent indicators out of the US have been uneven at best.