The yen soared momentarily to 115.70 to the dollar on the Tokyo market early May 15, the highest point since Jan. 13, reflecting the continuing recovery of the Japanese economy.
The new level marks an 11-point rise by the yen over the last two weeks. At 5 p.m., the currency was changing hands at 116.20-22 to the dollar. This compares to the 118.91-118.94 yen marked in Tokyo at 5 p.m. May 14 and the quote of 117.15-25 yen late the same day in New York.
Dealers said Japanese institutional investors, including trust banks and life insurance companies, began selling the dollar early in the morning to hedge against losses from possible further falls. "Tokyo players had been underpinning the dollar until yesterday on expectations that it would return to the 120 yen level, but the tumble overnight set off decisive selling," said Hitoshi Iwanami, chief dealer at Hokkaido Takushoku Bank.
Eisuke Sakakibara, director general of the Finance Ministry's International Finance Bureau, said that the latest Group of Seven agreement could be seen filtering through currency markets sufficiently. But Sakakibara declined to comment when asked by reporters if the yen's recent rise against the dollar is steep.
In their meeting in Washington late last month, the G-7 finance ministers and central bankers called for a halt to the dollar's strength on currency markets. The dollar's weakness was in line with its overnight fall in New York following the release of fresh economic data that suggested that the U.S. Federal Reserve will not change its current credit policy at its policymaking meeting next week.