Yen hits record low against euro; Last Updated: Monday, 16 April 2007, 06:40 GMT 07:40 UK

The yen fell to a record low against the euro after Group of Seven finance ministers meeting in Washington failed to single out the currency's weakness.

At the last G7 meeting, officials had been concerned how the yen's value had been pushed down by carry trades.

Carry trades are transactions in which investors borrow money from countries with low interest rates, such as Japan, to invest in higher-rate economies.

The yen fell to 162.43 to the euro, but recovered slightly in later trading.

There is concern that rising Japanese interest rates could cause problems in world markets because so much money is invested in carry trades.

Yuan focus

The main reference to currencies in the G7 communique was to repeat February's call for exchange rates to reflect economic fundamentals, referring specifically to the Chinese currency.

Ministers reiterated calls for China to allow the yuan to appreciate more rapidly.

At present China only allows the yuan to trade in a very narrow field against the dollar, but it has long pledged to allow the yuan to trade more freely as and when this is possible.

China's exchange rate policy has been a source of contention in the US, with some politicians and businessmen arguing that the country is gaining an unfair advantage by holding back the rate at which it can appreciate.