The euro hit a two-year high against the dollar today on expectations that euro zone interest rates will soon rise.
The single currency also raced to a record high against the yen as investors awaited a meeting of Group of Seven finance officials later in the day.
Traders expected G7 officials would not single out yen weakness at the gathering in Washington. In that case, the low-yielding yen could come under even more pressure.
Indications from the European Central Bank (ECB) yesterday that it will raise rates in June or beyond to stem inflation helped drive the euro to $1.3524 on electronic trading platform EBS, its highest since January 2005.
The ECB kept rates unchanged at 3.75 per cent yesterday, but President Jean-Claude Trichet said the central bank would monitor prices "very closely" - wording that has preceded rate rises in the past.
At the same time, market participants say it is possible that the US Federal Reserve could cut rates from 5.25 per cent later this year if the effects of a soft housing sector spill into the rest of the economy, although inflation concerns persist.
The euro inched up to a record high 160.88 yen on the view that the euro interest rate will maintain its hefty advantage over the yen's paltry 0.5 per cent for some time to come.
It then trimmed gains to trade essentially flat at 160.60 yen as some investors became wary of selling the yen aggressively before Friday's G7 meeting.