Euro rise unwanted, G7 misunderstood - Juncker

LUXEMBOURG (Reuters) - Financial markets failed to understand the message from the Group of Seven financial leaders on foreign exchange, the chairman of euro zone finance ministers said on Thursday, criticising the euro's surge to new highs.

The comment by Jean-Claude Juncker, the Luxembourg prime minister who chairs monthly meetings between euro zone finance ministers and the European Central Bank, sent the euro sharply lower against the dollar EUR=.

"I don't have the impression that financial markets and other actors have correctly and entirely understood the message of the G7 meeting," Juncker told reporters.

Finance leaders from the Group of Seven industrial countries -- the United States, Canada, Japan, Britain, Italy, France and Germany -- said in a statement on April 11 they were concerned about sharp fluctuations in foreign exchange markets.

"There have been at times sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability," the G7 statement said.

The statement was more sharply worded than the group's comments on foreign exchange at its previous meeting, in February, and depressed the euro at the start of the week.

But the euro hit new highs against the dollar and the British pound earlier on Thursday, following data from the United States and the euro zone, which showed euro zone inflation at a record high of 3.6 percent in March.

That data erased any earlier expectations that the European Central Bank would cut interest rates to support slowing growth in the single currency zone, giving the euro a strong boost.

"Because of recent macroeconomic and inflation data from the U.S. and the European area, there has been a move in the other direction, a direction that I don't consider desirable," Juncker said.

By 1157 GMT, the euro had fallen 0.6 percent on the day to $1.5853, having earlier hit a record high $1.5983.

"It's a reaction to Juncker's comments, which has prompted some short-covering in the dollar," a London-based trader said.

"But it's not like it's the ECB saying this, so we'd like to see if the central bank takes on the same view," he added.

(Additional reporting by Naomi Tajitsu and Veronica Brown in

London; Writing by Jan Strupczewski; Editing by Dale Hudson)