The dollar appears likely to remain locked in a relatively narrow 105-110 yen range through much of this month.

The dollar gained ground against the yen in mid-May amid expectations of widening interest rate differentials between Japan and the United States in the wake of the May 16 interest rate hikes by the U.S. Federal Reserve.

In a move aimed at slowing economic growth and keeping inflation in check, the Fed’s policy-setting Federal Open Market Committee raised its target for the federal funds rate by 50 basis points to 6.5 percent.

The FOMC also raised the discount rate to 6 percent from 5.5 percent. When it hit 110 yen shortly afterward, however, the dollar turned lower. Its strong showing prompted Japanese exporters and other companies to unload their dollar holdings.

U.S. share prices then came under severe selling pressure amid fears of additional interest rate hikes.

The dollar dropped below 107 yen late last month amid reports that the U.S. trade deficit hit a record high in March.

Given political uncertainty ahead of the June 25 general election and stalled economic recovery in Japan, however, the yen could soon come under fresh selling pressure.

The euro’s strong showing against the yen in recent weeks is also weighing on the yen’s value relative to the dollar as well.

Still, recent U.S. economic reports showing benign inflation coupled with expectations of an imminent end to Japan’s zero interest rate policy could shore up the yen. U.S. financial markets took comfort last week from jobs data and other encouraging economic figures, which helped ease fears of additional interest rate hikes.

Still, the dollar-yen rate could continue struggling to find its way for weeks to come amid uncertainty about the outcome of the next FOMC meeting, set for June 16.

Emerging as focal points in Japan are an official report due out Friday on gross domestic product for the first quarter of the year.

Worse-than-expected GDP data will no doubt work negatively for the yen. The market is also keeping a close eye on developments on the political front ahead of the general election.