Euro Hits Record Highs vs Yen, Stocks Lower

The euro hit lifetime peaks against the yen and the Swiss franc on Wednesday while European shares dipped.

The euro hit lifetime peaks against the yen and the Swiss franc on Wednesday while European shares dipped as inflation reports in the euro zone and UK backed up expectations of higher interest rates.

Oil came off an earlier two-week high after protestors in Nigeria, the world's eighth largest exporter, ended their occupation of an oil hub. Gold held steady while London robusta coffee hit an eight-year high.

Euro zone consumer inflation data showed inflation staying below the European Central Bank's target ceiling of 2 percent. But this did nothing to change the view for a June interest rate hike given recent robust growth.

The FTSEurofirst 300 index of top European shares was down 0.2 percent on the day. Inflation-sensitive banks were the biggest negative weight on the index, with France's Credit Agricole down more than 4 percent after its rise in first-quarter profits fell short of consensus expectations.

"Central banks all over the world are worried about inflation, and there's an expectation that key rates will move higher," said Gerhard Schwarz, head of global equity strategy at HVB/UniCredit.

Tokyo stocks closed up 0.1 percent with auto shares such as Honda Motor Co Ltd propping up the market. Chinese stocks rose after a 3.6 percent tumble on the previous day.

On Wall Street, the Dow Jones industrial average hit a record close on Tuesday, posting its 44th since the start of October 2006 after tame U.S. inflation data. U.S. stock futures pointed to a mixed open on Wall Street.

Investors are awaiting U.S. hosing starts and industrial production data.

RATE DIFFERENTIALS

The euro rose as high as 163.87 yen, bringing its gains since January to more than 4 percent. It rose as high as 1.6541 Swiss francs.

The euro has been repeatedly printing new highs due to expectations that interest rate differentials between the euro zone and Japan will widen further.

Sterling hit a two-month low against the euro after the Bank of England's inflation report which gave no confirmation that interest rates are going up again, as being priced in by markets.

"It has neither ruled out nor guaranteed an interest rate hike. Uncertainty is the key message and... it is clear that (the BoE) does not have a predetermined path for interest rates, the latter now more highly data-sensitive than ever," Calyon said in a note to clients.

Sterling was already struggling to benefit from last week's BoE rate hike to 5.5 percent, the highest among the G7 nations.

Euro zone government bonds were steady on the day.

London Brent crude, currently seen as more representative of the global oil market, erased early gains, down 22 cents at $67.89 a barrel. The focus is on U.S. government data on crude and fuel stocks data due at 1430 GMT.

Spot gold was little changed at $670.65. London robusta coffee futures hit an eight-year high as tight supply triggered fund buying.