The Yen Edged Lower, While The Dollar Gained As The Fed Decision Loomed

The Japanese Yen (JPY) edged lower for the third straight session on Tuesday. USD/JPY was supported by a stronger U.S. dollar as investors remained cautious ahead of the Federal Reserve (Fed) decision and U.S. inflation data for May to be released on Wednesday.

The yen struggled after mixed data was released on Monday. Annualized data on Japan’s gross domestic product (GDP) showed that the Japanese economy contracted less than expected in the first quarter. Meanwhile, Q1 GDP contracted on a quarter-on-quarter basis, in line with the preliminary estimate. Also, a steady performance in the stock market weakened the yen. Investors look forward to the Bank of Japan’s policy decision on Friday.

The U.S. Dollar Index (DXY), which measures the value of the greenback against six major currencies, remained unchanged as the probability of two rate cuts by the Federal Reserve (Fed) in 2024 decreased. The CME FedWatch tool shows that the probability of the Fed cutting interest rates by at least 25 basis points in September has fallen to nearly 49.0%, down from 59.5% a week ago.

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