The dollar soared against the yen in Tokyo on April 7, briefly hitting 125 yen for the first time since February 1993 amid growing expectations of higher interest returns on U.S. securities.
The dollar changed hands at a 50-month high of 125.00 yen in the early afternoon before falling back to 124.68-71 yen at 5 p.m., almost the same as the 124.69-72 yen marked at 9 a.m. but up from 124.20-30 yen late April 5 in New York. The dollar gave up some of its early gains as its rise to 125 yen brought fears that the Bank of Japan would step in to keep the yen from falling further, a commercial bank said.
Widening gaps between Japanese and the U.S. interest rates enticed Japanese banks and institutional investors to build their long dollar positions to finance their purchases of U.S. securities, they said. There was speculation that the U.S. Federal Reserve's policy-setting body would call for further interest rate hikes at its next meeting late next month.