Key facts
- The yen rose 0.2% against the U.S. dollar to 159.055 yen.
- Japanese GDP expanded at an annualized 1.1% in the second quarter.
- Investor expectations for a Federal Reserve rate hike this year have diminished.
- Fed funds futures indicate a 66.9% probability of interest rates being held at the September meeting.
- The U.S. dollar index, measuring the greenback's strength against six currencies, was down 0.1%.
The Japanese yen saw a modest increase against the U.S. dollar, largely unaffected by weaker-than-expected Japanese GDP figures, as market participants adjusted their expectations for Federal Reserve rate hikes this year. Data released Monday indicated that Japan's GDP expanded at an annualized rate of 1.1% in the second quarter.
Analysts noted that while GDP growth was decent, the details presented a mixed picture, with government consumption showing an impact from expansionary fiscal policies. Meanwhile, softer U.S. economic indicators, including non-farm payrolls and inflation gauges, have dampened investor sentiment regarding further rate increases from the Federal Reserve in 2023.
Fed funds futures now suggest a 66.9% probability that the Federal Reserve will maintain its current interest rates at its upcoming meeting in September, a notable increase from the 47.6% chance a month prior. The U.S. dollar index, which tracks the greenback's performance against a basket of major currencies, fell by 0.1%, nearing its lowest point for the month.
In other markets, oil prices experienced fluctuations, with Brent crude edging down slightly. Talks between the U.S. and Iran regarding the Middle East conflict remain stalled. The U.S. dollar was flat against the Chinese yuan in offshore trading ahead of key economic data releases. Cryptocurrencies, including Bitcoin and Ether, saw minor declines.