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Euro hits record high against yen on outlook for higher European interest rates

Euro hits record high against yen on outlook for higher European interest rates

The euro hit a record high of 163.31 yen on Tuesday amid expectations the European Central Bank will continue to tighten monetary policy while the Bank of Japan moves slowly on raising interest rates.
Traders said euro-buying is likely to continue, and propelling the European currency even higher in the near term.
"Demand for the euro (versus the yen) is still solid amid expectations of a robust economy and high yields in Europe," said Tokyo Forex and Ueda Harlow senior manager Masanobu Ishikawa.
"It's inevitable for the euro to keep rising against the yen," he said. "Unlike the ECB, the Bank of Japan probably won't lift interest rates soon given recent economic data such as the consumer price index."
Since the start of the year, the European currency has risen about 4 percent against the yen on expectations European interest rates will rise faster than Japanese rates. The ECB's key interest rate stands at 3.75 percent, while Japan's is at 0.5 percent.
At 2:50 p.m., the euro settled at 163.23 yen, down slightly from 163.27 yen on Friday. Japanese markets were closed Monday, a national holiday.
The dollar was also little changed against the yen amid thin trading over Japan's Golden Week holidays. At 2:50 p.m. (0550 GMT) Tuesday, the dollar was trading at 119.57 yen, up from 119.56 yen late Thursday in New York.
But some said the greenback may be due for a sharp fall amid growing speculation the Federal Reserve could cut interest rates soon in response to a sluggish economy and signs of moderating inflation.
"The dollar remains strong only against the yen," said Tsutomu Soma, a senior trader at Okasan Securities. "If U.S. economic indicators due out later this week turn out to be weak, the dollar will finally begin to fall against the yen."