The dollar fell below ¥108 in Tokyo trading on Tuesday, reflecting a drop in Japanese stock prices and a decline in U.S. long-term interest rates.

At 5 p.m., the dollar stood at ¥107.92, down from ¥109.49 at the same time Monday. The euro was at $1.266, down from $1.300, and at ¥121.59, down from ¥123.72.

The yen’s rise led to a decline in Japan’s 225-issue Nikkei average, which prompted the Japanese currency to rise further, an official at a foreign exchange margin trading service firm said.

U.S. interest rates fell in off-hours trading as speculation grew that the Federal Reserve will introduce yield curve control this week, the official said.

The dollar was also weighed down by Monday’s announcement by the U.S. National Bureau of Economic Research that the United States entered a recession in February, a life insurance company official said.

The underlying tone has shifted in favor of the yen, making traders cautious about chasing a higher dollar, dealers said.

“The atmosphere changed after the dollar could not rise above ¥110 late last week, and speculative traders apparently moved to sell the dollar,” a currency broker said.

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