The euro reached a record peak against the yen this morning on expectations for the Bank of Japan (BOJ) to raise interest rates only gradually.
The euro extended its gains against the low-yielding yen for the second straight session, getting a boost from Friday's remarks by BOJ governor Toshihiko Fukui that all but doused fears of a rate rise in July.
The yen was also on the back foot after US Treasuries and equities rallied on Friday as investors took comfort from data showing a tamer-than-expected gain in US core consumer prices.
The euro rose 0.15 per cent against the yen from late US trading on Friday to 165.45 yen staying near its record high of 165.56 yen on electronic trading platform EBS.
The euro was steady at $1.3395 holding on to its gains from Friday when it rose 0.5 per cent, helped by US data showing slower-than-expected rises in core consumer prices, a decline in consumer confidence and surprisingly flat industrial production.
The dollar rose higher to 123.55 yen clawing back towards a four-and-a-half year high of 123.66 yen reached on Friday, and an eventual rise toward 125 yen seemed likely, traders said.
US Treasuries have been hit hard in the past two weeks on concerns about inflation and fears of rising interest rates globally, pushing 10-year yields to five-year highs last week and denting US equities.