The euro hit a record high against the yen and two-week peaks versus the dollar on Tuesday, bolstered by speculation about central bank reserve diversification out of dollars and expectations for higher euro zone interest rates.
Qatari central bank governor said on Tuesday the central bank could hold up to 40 percent of its reserves in euros. Kuwait's central bank governor said a substantial part of the bank's reserves is in euros and he is studying whether the euro is becoming more attractive.
Comments raised speculation oil-rich Middle Eastern central banks might be diversifying away from dollars into euros, a return of the trend which in 2004 pushed the euro to a record high against the dollar.
"We are seeing the attitude of central bankers across the world. They are clearly not very comfortable holding so much of their wealth in dollars and reserve diversification is important, is a story and it is helping the euro," said Marios Maratheftis, currency strategist at Standard Chartered.
The euro rose to a record high of 143.90 yen, up 0.7 percent on the day. Against the dollar it was up 0.9 percent at $1.2242, near the top of the $1.18-$1.23 range seen since December and a two-month high. It also hit a two-year high of 1.5857 Swiss francs earlier in the day. The euro earlier drew support from a report by news agency Market News which quoted a Eurosystem official as saying a majority of the ECB Council wants a rate rise in May and also quoted central bank sources saying a majority of the ECB Council was now convinced of the need for further rate rises.
Just days ahead of the ECB's monetary policy meeting, the report reinforced an already widely held market view that rates would rise to 2.75 percent in May. But the bank is expected to keep interest rates on hold when it meets this Thursday.