Yen Edges Up as Traders Reassess Fed Rate Hike Chances

The Japanese yen strengthened against the US dollar on Tuesday, despite weaker-than-expected GDP data. The currency gained 0.2% to 159.075 yen, its second straight day of modest gains.

The economy expanded at an annualized rate of 1.1% in the second quarter, which was lower than expected. However, government consumption rose, suggesting that Takaichi's expansionary fiscal policies are starting to have an impact, according to Capital Economics analysts.

Meanwhile, the Federal Reserve's interest rate hike expectations were reduced due to soft US data, including non-farm payrolls and inflation gauges. The Fed funds futures now price a 69.9% probability of holding rates at their next meeting, up from 47.6% last month.