The dollar continued its upward climb against the yen Thursday with widening interest rate differentials between Japan and the United States working in its favor.
In Tokyo, the dollar hit a 7 1/2 -month high of 124.48 yen at 5 p.m., up 0.78 yen from late Wednesday. In New York interbank trading overnight, the dollar changed hands at 124.22 yen.
The U.S. Federal Reserve's threatened credit-tightening has provided a major lift to a switch into higher-yield U.S. investment vehicles.
At the end of its Federal Open Market Committee meeting Tuesday, the Fed declared it would raise interest rates at a hint of inflation.
The currency market has also been relieved that U.S. Treasury Secretary-designate Lawrence Summers has signaled he intends to continue the strong dollar policy pursued by departing Treasury Secretary Robert Rubin.
Speaking at a joint news conference in Malaysia early this week, after a meeting of finance ministers of the Asia-Pacific Economic Cooperation forum, Summers reiterated that a strong dollar is in America's interest in that it keeps inflation in check.
Tokyo share prices managed to eke out a modest gain, snapping a five-session losing string. The benchmark 225- issue Nikkei average rose 71.81 points to end the day at 16,199.99.
After plunging below the 16,000 level earlier in the day for the first time in seven weeks, the key market gauge turned higher toward the close of the day's trading.