Yen Gains on Robust GDP as Dollar Falters Amid Weak U.S. Data

The Japanese yen strengthened 0.27% to 151.94 per dollar on Monday after Japan's Q4 GDP data exceeded expectations, fueling speculation of further rate hikes by the Bank of Japan (BOJ) in 2024. Traders are now pricing in 35 basis points of hikes by December, with analysts like Marcel Thieliant from Capital Economics forecasting more aggressive BOJ tightening.

Meanwhile, the U.S. dollar remained under pressure following weaker-than-expected retail sales data, reigniting bets for Federal Reserve rate cuts. The dollar index stood at 106.79, down 1.2% from last week. Optimism over a delay in Donald Trump's reciprocal tariffs and ongoing Ukraine peace talks in Saudi Arabia also weighed on the greenback. National Australia Bank's Rodrigo Catril noted that weaker U.S. data and geopolitical optimism are challenging the dollar's strength.

The euro edged closer to $1.05, trading at $1.0487, while the British pound remained steady at $1.2582.

In the Asia-Pacific region, the Australian dollar rose 0.07% to $0.6357 ahead of the Reserve Bank of Australia's (RBA) rate decision on Tuesday. Markets expect a 25-basis point cut, the first in over four years, aligning the RBA with other central banks’ easing cycles. The New Zealand dollar also inched up 0.03% to $0.5734, with the Reserve Bank of New Zealand set to announce a 50-basis point rate cut on Wednesday.

As forex markets react to economic data and policy shifts, traders remain focused on global central bank actions, geopolitical developments, and U.S. economic performance.