* Euro gains as Italian referendum as expected
* Dollar strength seen overextended (Adds market action, changes dateline, previous LONDON)
By Karen Brettell
NEW YORK, Dec 5 (Reuters) - The euro recovered from earlier weakness against the U.S dollar on Monday after Italian Prime Minister Matteo Renzi's loss in a referendum over constitutional reform was seen by traders as largely expected and recent euro weakness was seen as having run too far.
Renzi is set to resign on Monday after the decision. The size of the "No" vote, at 59.1 percent, was more emphatic than had been forecast.
Renzi's resignation could open the door to an early election next year and the possibility of the anti-euro 5-Star Movement gaining power, though many investors and analysts see it as more likely that a caretaker government will be put in place until an election in 2018.
"There's not a large political implication for the euro and the euro is also very overextended," said Mark McCormick, North American head of foreign exchange strategy at TD Securities in Toronto.
The single currency tumbled as much as 1.4 percent in Asian trade to hit $1.0719, its weakest since March 2015, before recovering to $1.0709, up 0.43 percent on the day.
The greenback also weakened to 2-1/2 week lows against a basket of currencies on Monday as investors viewed recent dollar strength as overdone.
A solid but unexceptional U.S. jobs report for November on Friday failed to add additional fuel to the dollar rally sparked by Donald Trump's surprise presidential election victory on Nov. 8.
U.S. nonfarm payrolls increased by 178,000 jobs last month after increasing by 142,000 in October, the Labor Department said on Friday. However, wages slipped for the first time in nearly a year.
"The details in the nonfarm payrolls number were not that great," McCormick said. "The dollar has overshot the rates story, and market positioning has moved kind of quickly, and so there is some scope for it to pull back over the next couple of weeks."
The dollar index, which measures the greenback against a basket if six major currencies, slipped 0.31 percent to 100.47, the lowest since Nov. 17. The index reached an almost 15-year high of 102.05 on Nov. 24.
Reporting by Karen Brettell; Editing by Will Dunham