(Changes byline, adds comment, updates prices)
* Yen hits 4-month low vs dlr, 7-month low vs euro
* G8 disappoints dollar bulls, but action still possible
* Euro recovers Irish referendum losses
By Toni Vorobyova
LONDON, June 16 (Reuters) - The dollar came under some
pressure on Monday after a Group of Eight meeting yielded no
joint statement on currencies, while the euro recovered losses
sparked by the Irish rejection of the EU reform treaty.
With the G8 event risk over, and the financial sector
boosted by Barclays' <BARC.L> capital raising plan, improved
risk appetite knocked the yen to seven-month lows versus the
euro and four-month troughs against the dollar.
In contrast to expectations for U.S. and euro zone rate
hikes, Japan's policy rate is forecast to remain unchanged at an
ultra low 0.5 percent this year, making the yen an attractive
source of funding for higher yield, higher risk trades.
The yen aside, the dollar was broadly softer versus majors
<.DXY> after G8 finance ministers, in the absence of central
bankers, avoided commenting on currencies and instead focused on
soaring commodity prices [].
The euro in turn recovered from Friday's one-month low
versus the U.S. currency hit after Ireland voted 'no' in a
referendum on a European Union reform treaty [].
"As we go into this week, there is a realisation that it
doesn't really change much for now in terms of the euro itself,
so there is a bit of a retracement on the back of that," said
Mitul Kotecha, head of global foreign exchange research at
Calyon.
"You could attribute it (euro gains) to some disappointment
on the G8 certainly ... There was build up of expectations of
something more significant on currencies, so in the end it was a
disappointment for dollar bulls."
By 1023 GMT, the euro was up 0.3 percent at $1.5419, more
than a cent above Friday's one-month low around $1.5300 <EUR=>.
The single European currency also rose to 167.20 yen
according to Reuters data, its highest since November <EURJPY=>.
The dollar hit a four-month high at 108.58 yen <JPY=>.
INFLATION ANGST
Analysts said the euro would remain supported on the
possibility that the European Central Bank may lift rates as
early as July due to rising inflation risks.
Data on Monday showed euro zone May inflation revised up to
a new record high of 3.7 percent year-on-year [].
Growing concern about rising inflation in the euro zone was
highlighted in comments by ECB Executive Board member Gertrude
Tumpel-Gugerell, who on Monday said increasing wage pressures in
the euro zone were producing worrying signs [].
Inflation is also an issue in the United States, where
Federal Reserve President Ben Bernanke earlier in the month said
a weak dollar was partly to blame, fuelling speculation for a
rate rise in the coming months.
At the same time, U.S. Treasury Secretary Henry Paulson has
on numerous occasions -- including on the sidelines of the
weekend's G8 meeting -- voiced his desire for a strong dollar,
saying that it is in the nation's interest.
Analysts said that the G8 may yet agree on a comment on
currencies, and that the lack of such a statement this time
could simply reflect the fact central bankers were not present.
"Comments on exchange rates are normally reserved for the
full meetings of both finance ministers and central bankers and
as such the G8 attitude to the dollar will remain a live issue
until the full G8 meeting in Hokkaido on July 7-9," RBC Capital
Markets said in a research note.
The dollar, however, could come under pressure if quarterly
earnings announcements by U.S. investment banks this week
rekindle concerns about the financial sector's losses from the
turmoil in credit markets, traders said.
As well as results from Lehman Brothers before the Wall
Street open, Monday's calendar features U.S. capital flows data
for April at 1300 GMT.
(Editing by Ruth Pitchford)
