By Toma Mochizuki ,
The U.S. dollar climbed into the 120 yen range on Tuesday in Tokyo for the first time since February 2016, after the U.S. Federal Reserve hinted at further raising its key interest rate to tackle soaring inflation, while Tokyo stocks ended at the highest point in over a month.
At 5 p.m., the dollar fetched 120.47-48 yen compared with 119.43-53 yen in New York at 5 p.m. Monday.
The euro was quoted at $1.0983-0984 and 132.32-36 yen against $1.1010-1020 and 131.57-67 yen in New York late Monday afternoon.
The 225-issue Nikkei Stock Average rose 396.68 points, or 1.48 percent, from Friday to 27,224.11, its highest level since Feb. 17. Japanese financial markets were closed Monday for a national holiday.
The broader Topix index of all First Section issues on the Tokyo Stock Exchange was up 24.47 points, or 1.28 percent, at 1,933.74.
Gainers were led by mining, insurance and wholesale trade issues.
The dollar's recent strength against the yen is driven by the prospects of widening interest rate differentials in Japan and the United States, dealers said.
Its strength was fueled by Fed Chairman Jerome Powell's remarks Monday suggesting that the U.S. central bank may raise its key short-term interest rate in May by 0.5 percent, which it has not done since May 2000.
His remarks were made just days after the Fed decided on its first rate hike since 2018, abandoning its near-zero rate policy and lifting its target range for the benchmark rate by 0.25 percent, as the United States battles its steepest inflation in over 40 years.
Yuji Saito, head of the foreign exchange department at Credit Agricole Corporate & Investment Bank in Tokyo, said Powell's clear standing on how to deal with inflation amid an ongoing rise in energy prices fueled investors to chase the dollar.
The dollar's rapid ascent, rising about 5 yen in two weeks, was also underpinned by Bank of Japan Governor Haruhiko Kuroda's comments on Friday expressing views that a weak yen is a positive asset for the Japanese economy, Saito said.
Dealers may step up buying the dollar to test the 125 yen line after it broke the 120 yen threshold, he added.
In the equities market, the Nikkei index extended its winning streak to six days as the yen's depreciation spurred investors to buy export-oriented shares. The broader Topix index reached its highest level since Feb. 16.
Stocks were additionally backed by expectations U.S. shares would continue their recent upward trend, analysts said.
However, the Tokyo market was top-heavy as U.S. stock futures turned negative in the afternoon, while worries grew about the double impact on the Japanese economy of a weak yen and elevated crude oil prices, according to Yutaka Miura, senior technical analyst at Mizuho Securities Co.
Concerns over higher fuel costs weighed on airlines, with ANA Holdings declining 12.0 yen, or 0.5 percent, to 2,495.0 yen, while Japan Airlines fell 16 yen, or 0.7 percent, to 2,225 yen.
Meanwhile, energy-related issues were higher following an overnight climb in crude oil futures during New York trading.
Eneos Holdings gained 11.2 yen, or 2.4 percent, to 469.5 yen and Idemitsu Kosan rose 140 yen, or 4.2 percent, to 3,435 yen.
Among export-oriented shares that were buoyed by the weak yen, Nissan Motor advanced 9.8 yen, or 1.9 percent, to 515.2 yen, Mazda Motor rose 13 yen, or 1.5 percent, to 862 yen and electronics giant Hitachi was up 98 yen, or 1.7 percent, at 5,927 yen.
On the First Section, advancing issues outnumbered decliners 1,144 to 954, while 83 ended unchanged.
Trading volume on the main section fell to 1,533.23 million shares from Friday's 1,807.72 million.
The yield on the benchmark 10-year Japanese government bond rose 0.010 percentage point from Friday's close to 0.215 percent, tracking an overnight rise in U.S. Treasury yields on expectations the Fed will accelerate its rate hikes.
