Yen Gains Amid Weaker GDP Data and Cooling Rate Hike Expectations

The Japanese yen has risen modestly against the US dollar despite weaker-than-expected GDP data. The yen was up by 0.2% at 159.055 per dollar after the release of Q2 data, which showed an annualized growth rate of 1.1%. This marks a second consecutive day of gains for the yen.

Capital Economics analysts noted that while GDP expanded at a decent pace in the second quarter, government consumption jumped, indicating the impact of expansionary fiscal policies. However, traders are pushing back expectations of a Federal Reserve rate hike, with few clues expected from the central bank until the Jackson Hole symposium between August 27 and 29.

US data has been softening, reducing the likelihood of rate hikes. Fed funds futures now price an implied 66.9% probability that policymakers will hold interest rates at their next meeting, up from a 47.6% chance a month ago. The US dollar index was down by 0.1%, trading near its lowest levels this month.