The dollar has broken out of a narrow range, recouping much of its recent losses against the yen.

After having hovered around 105 yen since October, the dollar has moved steadily higher since late last month.

In Tokyo interbank trading Wednesday, the greenback at one point climbed past the 109 yen level for the first time since mid-September before settling at 108.48-51 yen.

There are indications that foreign investors are engaged in a big way once again in a carry trade, where they borrow yen at low interest rates in Japan and convert them to dollars to buy higher-yield foreign financial products, like U.S. Treasuries.

They are banking on Japan's short-term interest rates, which are expected to be left effectively at zero for months to come.

The strategy is apparently prompted by the statement issued at the end of the Group of Seven finance meeting in Tokyo last month, which signaled to the marketplace that the Bank of Japan will maintain its ultraeasy money policy longer than had been expected.

A policy switch by the BOJ, previously expected this spring, now appears unlikely until after summer.

According to the statement, the G7 financial leaders share Tokyo's concern over a strong yen. This tack was apparently adopted in return for the BOJ's commitment to maintain its zero interest rate policy.

Foreign investors' yen selling has more than offset Japanese firms' yen purchases to cover their export claims.

There is talk that the BOJ has bought more than $10 billion in the currency market since November to stem what it called a premature rise in the yen's value.

Without the BOJ's repeated intervention, domestic export-oriented companies' forward dealings to cover their export claims for the current quarter could have added to upward pressure on the yen.

The dollar now appears poised to test the 110 yen level shortly.

The Finance Ministry is still trying to talk up the dollar relative to the yen, saying the yen is still too strong.

Under the government-proposed fiscal 2000 budget, the ceiling on foreign exchange fund bill issues by the Finance Ministry has been raised by 10 trillion yen to 59 trillion yen. This is on top of a 10 trillion yen increase allowed under the second fiscal 1999 supplementary budget, giving the ministry and the BOJ more room to intervene in the currency market.

Should the dollar come under renewed selling pressure caused by developments on the U.S. financial market, the BOJ could step in again to keep the dollar from falling below 105 yen, considerably higher than its previous intervention level — 102 yen.