LONDON, May 21: The euro hit a record high against the yen early on Monday after Group of Eight finance ministers ignored the Japanese currency’s weakness at a weekend meeting, dealers said.

They added that traders were focused on the latest Chinese measures aimed at controlling heady economic growth by raising interest rates and widening the yuan’s narrow trading band.

The European single currency struck a peak of 163.94 yen overnight before easing back to 163.59 in late trading, compared with Friday’s close in New York of 163.56.

The euro eased meanwhile to $1.3461, from $1.3504 in New York late on Friday.

The dollar remained firmer against major currencies as investors reassessed the outlook for US interest rates, deeming a cut unlikely in the coming months.

After weeks of selling the dollar and buying the euro, investors took advantage of a quiet day in terms of newsflow to square off their positions.

With the chances of a rate cut in the United States considered less likely, and ECB rate hikes were already aggressively priced in, the dollar became more attractive than the euro in the short term.

“A creeping re-assessment of the US growth outlook appears to be weighing on US fixed income markets... and is providing the dollar with some support,” said Steve Pearson at HBOS.

He noted that the dollar might continue to strengthen despite the fact that growing risk appetite would draw capital away from the United States in search of higher yields.

“Further dollar gains seem likely, although they may well be grudging while risk appetite remains high,” he said.

The yen, meanwhile, weakened across the board, touching three-month lows against the dollar and rebounding only a bit from its all-time low against the euro overnight.

In contrast with the United States, where markets were becoming less sure that a rate cut might be delivered, European financial markets have already fully priced in two more hikes and most of a third towards the end of the year.

That tended to limit any gains in the euro.

Looking ahead, investors focused on the ZEW and Ifo German business confidence indicators, to be released on Tuesday and Thursday, respectively.—AFP