Asian Currencies Gain as Yen Hits Seven-Month High

Asian currencies mostly strengthened against the US dollar on Tuesday as the Japanese yen hit a seven-month high, while the dollar remained subdued ahead of key inflation data that could influence expectations for the Federal Reserve's next move.

The yen surged to its strongest level since February, beyond what it reached during Japan's July intervention, and has now gained around 4.5% from about 160 per dollar earlier last week.

The yen's advance reflects a combination of growing expectations for faster Bank of Japan tightening, the potential repatriation of Japanese investment funds, the unwinding of carry trades, and political pressure.

Japan's economy grew at an annualized 1.4% in the April-June quarter, revised up from 1.1%, adding to the case for further BOJ tightening, with markets now pricing around a 75% chance of a 25-basis-point BOJ hike on September 18 and a 60% probability of another increase by December.

Other Asian currencies also gained, including South Korea's won, which was supported by foreign inflows into Korean equities and a rally in semiconductor stocks. China's yuan remained firm near a three-and-a-half-year high.