Yen Gains Momentum on Reduced Rate Hike Expectations

The Japanese yen has strengthened against the US dollar due to traders scaling back their expectations of a Federal Reserve interest rate hike. The yen was up by 0.2% at 159.075 yen, and is on track for a second consecutive day of modest gains.

The currency's rise comes despite weaker-than-expected Japanese GDP data showing an annualized growth rate of 1.1%. However, the government bond yield jumped to a three-decade high, indicating that investors are reevaluating their expectations for a rate hike.

Fed funds futures now imply a 69.9% probability that Fed policymakers will hold interest rates at their next meeting, up from 47.6% a month ago. This reduced expectation of a rate hike has led to the US dollar index falling by 0.1%, trading near its lowest levels of the month.