Yen Surges as Traders Cut Back Bets on Fed Rate Hikes

The Japanese yen has strengthened against the US dollar as traders reduce their expectations of a Federal Reserve rate hike. The yen was 0.2% stronger at 158.965 yen, its second straight day of modest gains.

Despite weaker-than-expected Japanese GDP data showing a 1.1% annualized expansion in Q2, the yen shrugged off the news as traders shifted their focus to the Fed's rate hike expectations.

The euro, pound, and Australian dollar also gained strength against the US dollar, with the euro up 0.1% at $1.1582 and the pound up 0.2% at $1.3556.

The US dollar index slipped 0.1%, trading near its lowest levels of the month at 99.519. Oil prices fluctuated between gains and losses, with Brent crude climbing 0.8% to $89.21 a barrel.

According to BNY analysts, softer US data has reduced rate hike expectations, with less than one full hike now priced for December. The back end of the Treasury curve remains elevated due to credibility concerns.