Government officials' commitment to a weak yen policy has played a key role in daily currency market activity in recent months.

The yen, caught in a relatively narrow range around 120 to the dollar a couple of months ago, has been under downward pressure recently, weakening to around 135 by late last week.

Basically, exchange rate swings reflect market forces of supply and demand.

The yen's current weakness can be traced to the Bank of Japan's intervention in the money market in the wake of the Sept. 11 terrorist attacks in the U.S., when the BOJ sold more than 3 trillion yen for dollars to keep the greenback from falling further. As often seen in the past, the effects of the central bank's intervention usually take several months to become apparent.

Added to this is a shift in investor preferences away from Japanese financial markets in recent months and into foreign investment vehicles, which has increased selling pressure on the yen.

Japanese investors have largely hedged their foreign portfolios against investment risks in recent months and the yen's fall has prompted them to buy back dollars to cut losses.

In short, the dollar's current strength reflects an increasingly tight demand.

The dollar now appears set to trade between 130 yen and 140 yen in the coming months -- a level determined by forces of supply and demand.