With the July Group of Eight summit in Okinawa drawing near, the dollar appears likely to remain locked between 105 yen and 110 yen through much of the coming month and beyond.

A leading concern on the currency market in recent weeks has been higher U.S. interest rates.

The U.S. Federal Reserve raised the key interest rates by 50 basis points on May 16, a steeper hike than the previous four rounds of increases, marking a departure from the gradualist approach to monetary policy.

In the market’s view, the move preserved the possibility of additional rate hikes in the coming months.

Wall Street has since been on a roller-coaster ride, giving little heed to Fed Chairman Alan Greenspan’s stated aim to engineer a soft landing in which growth slows enough to keep inflation in check.

Bank of Japan Gov. Masaru Hayami meanwhile has signaled to the marketplace that the zero interest rate policy will be abandoned in the near future, saying fears of deflation have abated.

It is now considered a foregone conclusion that economic growth for the current fiscal year will clear the government-set target of 0.6 percent.

Forthcoming preliminary figures are widely expected to show a solid increase of somewhere between 2.4 percent and 2.6 percent in gross domestic product for the January-March quarter.

Still, worries linger over the domestic political uncertainty, which could unsettle the currency market in the coming months.

Prime Minister Yoshiro Mori’s recent “divine nation” remarks have cast a long shadow over his own political future as well as the Lower House elections expected to take place late next month.

In Europe, finance ministers from the 11 euro-zone countries issued a statement after their May 8 meeting that they shared “a common concern” about the EU’s ailing single currency. The market was unimpressed, however, as the statement sidestepped the question of central bank intervention and support for the euro.

It is encouraging to note, though, that a flight of money out of the euro-zone and into the United States, estimated at more than $400 billion over the past two years alone, is now visibly subsiding.