NEW YORK -- The dollar rallied against the yen yesterday, buoyed by dollar purchases by the Bank of Japan and signs that the yen's strength was exacting a heavy toll on the Japanese economy.
The German mark declined against the dollar and other currencies, meantime, amid speculation that slowing inflation would give Germany's central bankers leeway to cut interest rates when they hold their biweekly council meeting today. Lower rates would make mark-denominated deposits less attractive.
The dollar started rising in Tokyo as the Bank of Japan bought dollars for yen in a continuing effort to keep the yen from strengthening. The central bank has spent as much as $1 billion a day supporting the dollar since Aug. 17, when it hit a post-World War II low of 100.35 yen.
Concern that the strong yen was choking off Japan's fragile economic recovery by making its exports more expensive was prompting investors to dump the yen, said Ezra Zask, president of Ezra Zask Associates Inc., a currency-trading fund in Falls Village, Conn.
The dollar hit 105.33 yen in New York yesterday before finishing at 105 yen, up from 103.73 yen late Tuesday. It closed at 1.6845 marks, up from 1.6795 marks.