Yen Strengthens on Japanese Statistics and Rate Hike Expectations

The yen has strengthened significantly due to improving Japanese statistics and expectations of further rate hikes by the Bank of Japan. Revised GDP showed more resilient growth, while real wages increased by 2.4% year-on-year in July.

These figures have led to strong expectations for a 25-basis-point rate hike at next week's meeting, with the market almost fully pricing it in.

However, the US dollar is not receiving sufficient support from Federal Reserve expectations, causing the dollar index to fall to its lowest level in nearly two weeks.

The divergence in expectations between the two central banks remains in favor of the yen, but a significant portion of the Japanese currency's strengthening has already been realized, with the yen gaining about 4% over the last five sessions.