Yen holds near record low vs euro

TOKYO, Nov 21 (Reuters) The yen stayed in sight of a record low against the euro on Tuesday, pressured by expectations that the Bank of Japan will raise interest rates only slowly.

The yen weakened broadly on Monday after a weekend meeting of finance ministers and central bankers failed to offer any significant comments on the yen's weakness or on carry trades in the currency.

In such trades, which have helped to push the low-yielding Japanese currency to a succession of all-time lows against the euro, investors borrow the yen to buy a higher yielding currency.

Traders said that demand for foreign assets from Japanese retail investors hungry for higher yield, especially through investment trusts that invest overseas, was expected to keep boosting other currencies against the yen.

''More foreign currency buying linked to investment trusts is expected as there have been more launches of big investment trusts,'' said Noburo Ibaraki, forex manager at Nomura Trust and Banking.

In early Tokyo trade, the dollar was little changed at 118.05 yen.

The euro were a tad higher at $1.2825.

The euro spiked up to the day's high of $1.2840 and the U.S.

currency darted down to 117.88 yen on selling of the dollar by a big U.S. life insurance company, before the currencies quickly reversed course, traders said.

The move was exaggerated amid thin trade and caught many in the market off guard, dealers said.

The euro was nearly flat at 151.30 yen in sight of a record high of 151.68 yen hit on electronic trading platform EBS on Monday.

Given a lack of major economic data and ahead of a holiday on Thursday in both Japan and the United States, currencies were expected to move in narrow ranges as dealers hesitated to bet heavily.

The market will focus on comments from European Central Bank President Jean-Claude Trichet, who is slated to hold a news conference later in the day.

Trichet said on Monday that the ECB has to be strongly vigilant on inflation risks, the typical signal that interest rates are set to climb, helping the euro to rise.

REUTERS DKS PM0658