Yen Edges Higher as Traders Ditch Rate Hike Bets

The yen has edged higher against the dollar as traders have pushed back expectations of a rate hike from the Federal Reserve this year. The Japanese currency was 0.2% stronger against the US dollar, trading at 159.055 yen.

This move comes despite weaker-than-expected Japanese GDP data for the second quarter, which expanded at an annualised 1.1%. Capital Economics analysts noted that the details were a 'mixed bag', with government consumption increasing but the pass-through from higher energy prices being limited by the government's policies.

The Fed is not expected to make any significant moves until the Jackson Hole symposium between August 27 and 29, where it will provide clues on interest rates. Fed funds futures are pricing an implied 66.9% probability that Fed policymakers will hold interest rates at their next two-day meeting ending on September 16.

The US dollar index, which measures the greenback's strength against a basket of six currencies, was 0.1% lower, trading near its lowest levels of the month at 99.519. The euro and British pound were flat and up 0.1%, respectively, while the Australian and New Zealand dollars were level.