The euro hit a record high against the yen and inched further away from a two-month low versus the dollar on Tuesday after hawkish comments by European central bankers stoked expectations for higher interest rates. ECB Governing Council member Yves Mersch told Bloomberg news in an interview published on Monday that the European Central Bank had never ruled out tightening policy faster than by a quarter-point every three months. Mersch also did not rule out a rate rise after an ECB meeting on Aug. 3, to be held by teleconference, or a 50-basis-point rate increase. "The effects of his comments will linger for a while," said a dealer at a Japanese trust bank. "The difference in interest rates is driving the market right now, leaving the yen at a disadvantage." Expectations that the Federal Reserve will raise rates by 25 basis points at a meeting this week and possibly again in August helped drive the dollar to two-month highs against major currencies last week. The dollar fell to intraday lows against the yen after Wu Xiaoling, deputy governor of China's central bank, was cited by the official Financial News as saying that countries around the world should gradually rely less on the dollar for trade and their foreign exchange reserves. "The comments compounded already weak sentiment for the dollar/yen," said a trader at another Japanese trust bank. In the run-up to the Fed's policy meeting, the dollar could temporarily rise to 117 yen before facing options-related offers and selling by Japanese exporters, traders said.