Yen Trades Near Two-Week Low Despite BoJ Hike Expectations

The Japanese Yen (JPY) has been trading near its two-week low against the US Dollar (USD), despite expectations of a Bank of Japan (BoJ) interest rate hike in September.

According to MUFG, market expectations for further BoJ tightening remain robust, with an 80% probability of a hike. This firm rate-hike pricing should limit renewed Yen selling in the near term.

Japan's preliminary Q2 Gross Domestic Product (GDP) data came in weaker-than-expected, which could act as a headwind for firm BoJ hawkish bets. The GDP rose 0.3% q/q, compared to consensus of 0.5%, and was driven by net exports and government consumption.

The US Dollar is expected to trade sideways as the Federal Open Market Committee (FOMC) minutes of the July policy meeting are released on Wednesday. The FOMC left interest rates unchanged in July and didn't deliver any forward-guidance on policy rates, which investors will pay attention to for fresh cues on inflation and economic outlook.