The U.S. dollar was in the lower 125 range Monday, its highest level since June 2015, due to the possibility of widening interest rate differentials between the United States and Japan, following an upward trend in U.S. Treasury yields.
The dollar rose to 125.24 -- 26 after briefly rising to 125.43, compared with 124.23 -- 33 in New York and 124.04 - 05 in Tokyo at 5 p.m. Friday.
The euro was quoted at $1.0909 -- 0911 and 136.63 - 67, against $1.0870 -- 0880 and 135.11 -- 21 in New York and $1.0866 -- 0868 and 134.79 - 83 in Tokyo late Friday afternoon.
On the Tokyo Stock Exchange, the 225-issue Nikkei Stock Average was down 164.28 points, or 0.61%, from Friday at 26,821. The Topix index finished 7.15 points, or 0.38%, lower at 1,889. The dollar accelerated its rise against the yen in the afternoon, rising to the lower 125 range, a level unlike anything in nearly seven years, from the lower 124 zone where it had been in the early morning.
Market participants wanted the dollar on the back of the contrasting approaches of the Bank of Japan and the U.S. Federal Reserve, which last month decided to raise key interest rates for the first time since 2018 and signaled six more rate increases this year to tackle high inflation.
The Japanese central bank has maintained its strong monetary easing.
The yield on the benchmark 10 year Japanese government bond went up 0.010 percentage point from Friday's close to 0.235%, a rise in its US counterparts after Treasury yields climbed to their highest level in over three years on speculation that the U.S. central bank would tighten its monetary policy more aggressively.
For most of Monday trading, stocks were in negative territory, tracking declines on the technology-heavy Nasdaq index late last week.
Market participants were wary ahead of the U.S. consumer price index for March, which was released Tuesday, on speculation that the data will show accelerating inflation.
On the TSE's top-tier Prime Market, decliners were led by precision instrument, electric appliance and information and communication issues.
The investors were worried that the U.S. Federal Reserve may become more aggressive in its monetary tightening, due to growing concerns about long-term inflation and the pace of interest rate hikes, said Makoto Sengoku, senior equity market analyst at Tokai Tokyo Research Institute.
The Nikkei jumped into positive territory to regain the 27,000 mark in the morning, supported by the yen falling into the upper 124 range against the dollar, which lifted some export-oriented issues.
The ongoing coronaviruses lockdown in China's financial hub of Shanghai has weighed on sentiment that the country s pursuit of a COVID- zero policy may restrict supply chains further, analysts said.
Fast Retailing, which operates the Uniqlo clothing chain, fell 1,640, or 2.7%, to 58,530, due to concerns about the impact of the Shanghai lockdown on sales.
The Tokyo Electron lost 350, or 0.6%, to 55,070 among tech shares, while Advantest declined 160, or 1.8%, to 8,590, or 1.8% of their U.S. counterparts.
As Japan attempts to phase out Russian coal imports, Tokyo Electric Power Company Holdings jumped 62, or 16.2%, to 444, after Prime Minister Fumio Kishida expressed his intention to use renewable energy and nuclear power to combat power shortages.
The renewable energy company Renova climbed 53, or 3.1%, to 1,789 after Kishida's news conference.
Among prime market issues, decliners outnumbered advancers 1,189 to 600, while 50 ended unchanged.
The trading volume on the Prime Market fell to 1,148. There were 89 million shares from Friday's 1,270. There are 96 million of them.