The yen strengthened slightly against the US dollar, despite weak GDP data from Japan. Traders have pushed back expectations for Federal Reserve interest rate hikes.
As of August 17, the exchange rate stood at 159.055 yen per dollar, marking a 0.2% increase. This marks the second consecutive day of modest strengthening for the Japanese currency, although it remains within its weekly trading range.
Japan's economy expanded by 1.1% in the second quarter on an annualized basis. Analysts at Capital Economics noted the mixed nature of the data, highlighting decent expansion rates and the impact of the government's fiscal policy.
Weak US indicators, ranging from employment to inflation, have diminished the likelihood of the Federal Reserve tightening its policy. Federal funds futures now price in a 66.9% chance of rates remaining unchanged at the September meeting, up from 47.6% a month ago.
Less than one full rate hike is currently priced in for December, according to BNY estimates. The US dollar index fell by 0.1% to 99.519, reaching one of its lowest levels for the month.
The euro remained stable at $1.1573, while the British pound gained 0.1%. The yuan held steady against the dollar ahead of upcoming Chinese activity data.
What awaits currency markets in the coming weeks, particularly until the Federal Reserve provides new signals at the Jackson Hole symposium?
