LONDON: The dollar climbed above 125 yen in London trading on Monday for the first time in six years and seven months, aided by the Bank of Japan’s offer for unlimited purchases of Japanese government bonds.

In Tokyo at 5:30 p.m., the dollar was at 124.01-03 yen, up from 121.70-75 yen at the same time Friday.

The dollar surged above 123 yen in Tokyo trading after the Japanese central bank offered in the morning to buy unlimited amounts of 10-year JGBs at a fixed yield to curb rising interest rates, the first such operation since Feb. 14. The announcement pushed the dollar up around 0.90 yen in an hour.

A second JGB purchase offer by the BOJ in the afternoon pushed the greenback further up. The BOJ’s announcement in the afternoon that it will conduct such an operation for consecutive days through Thursday gave a further lift to the dollar.

There was sporadic selling of the dollar to take profits. But the bout of selling was short-lived, as “many investors have already closed their positions during the dollar’s almost nonstop rise against the yen since March 11,” an official at a foreign exchange margin trading service firm said.

The dollar has been rising against the dollar recently amid expectations of wider interest rate differentials between Japan and the United States. The U.S. Federal Reserve is moving to tighten monetary to fight soaring inflation while the BOJ maintains its accommodative policy.

A weaker yen benefits Japanese exporters by making their products competitive overseas, but pushes up costs for imports of crude oil and other commodities.

BOJ Governor Haruhiko Kuroda has said the yen’s weakness is working in favor of the Japanese economy. But concerns are growing about the impact of a falling yen.

JIJI Press