The Japanese yen strengthened to around 159 per dollar on Monday, recouping part of last week’s losses as the dollar softened on weaker US economic data, which eased fears of an imminent Federal Reserve rate hike. Market pricing now suggests roughly a 67% chance that the Fed will keep rates unchanged in September, up from below 50% a month earlier.
The yen gained ground even as preliminary figures showed Japan’s economy grew less than expected in the second quarter, with weak domestic demand offsetting solid export performance. GDP expanded at an annualized 1.1% in Q2, missing market forecasts of 2%.
Traders remain on alert for potential currency intervention by Japanese authorities in response to the yen’s prolonged weakness. At the same time, markets are increasingly speculating about a possible Bank of Japan rate hike in September or October, amid concerns that a weaker yen could add to inflationary pressures.
