Yen stronger as traders pare bets on Fed rate hike

The yen gained momentum against the dollar, largely shrugging off weaker-than-expected Japanese GDP data as traders reined in expectations the Federal Reserve could raise interest rates this year.

The yen JPY= was 0.2% stronger against the U.S. dollar at 159.075 yen, on track for a second straight day of modest gains but still firmly within its trading range of the past week, after data on Monday showed Japanese GDP for the second quarter expanded at an annualised 1.1%.

Japan's 10-year government bond yield jumped to a three-decade high.

"The details were a mixed bag," Capital Economics analysts wrote in a research note. "GDP expanded at a decent pace in Q2 and with the government still limiting the pass-through from higher energy prices," they wrote, while a jump in government consumption "suggests that Takaichi’s expansionary fiscal policies are starting to have an impact."