Investing.com – The yen weakened on Monday in Asia after better that expected GDP led investors to back off on recent gains slightly as tensions on the Korean peninsula remain in focus and after China data showed some weakness.
In China, fixed-asset investment rose 8.3%, compared with a 8.6% gain seen in July on year along with industrial production which gained 6.4%, missing a 7.2% gain seen and retail sales increased 10.4%, compared to a 10.8% gain seen.
Japan’s second quarter surged an unexpected 4..0% on year as investment in plant and equipment lifted sentiment for the sixth straight quarter of expansion, official data released on Monday showed for the fastest pace of growth since January-March 2015.
USD/JPY changed hands at 109.36, up 0.16% after the data.
The figure beat a 2.5% gain expected on year and saw the quarter pace at 1.0, well above the 0.6% seen. Japan, second quarter GDP was expected to rise a provisional 2.5% on year and at a 0.6% pace on quarter.
Earlier, New Zealand reported retail sales jumped 2.0% in the second quarter on quarter, far exceeding a 0.7% rise seen. NZD/USD traded at 0.7311, down 0.11%.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, eased 0.03% to 92.96%. AUD/USD rose 0.4% to 0.7905.
Last week, the dollar slid against a basket of the other major currencies on Friday as weaker-than-expected U.S. inflation data tempered expectations for a third interest rate hike by the Federal Reserve this year.
A Labor Department report showed that U.S. consumer prices edged up 0.1% in July from the prior month, below the 0.2% increase forecast by economists.
Consumer prices were up 1.7% on a year-over-year basis from 1.6% in June.
The data was the latest in a string of weak inflation readings that investors worry will make the Fed more cautious about plans to raise interest rates again this year.
Futures traders are pricing in about a 35% chance of another rate hike by December, according to Investing.com’s Fed Rate Monitor Tool.
Expectations that rates will remain lower tend to weigh on the dollar by making U.S. assets less attractive to yield-seeking investors.
The euro moved higher against the dollar after Morgan Stanley (NYSE:MS) raised its forecasts for the currency, predicting it would reach the 1.25 level against the dollar early next year.
The yen and the Swiss franc posted large gains against the dollar for the week, rising 1.47% and 1.14% respectively as heightened tensions between the U.S. and North Korea sparked a flight to safety. The currencies are often sought in times of geopolitical tension or market turbulence because both countries have large current account surpluses.
In the coming week, Wednesday’s minutes of the Fed’s latest meeting will be in focus as investors look for more hints on the timing of the next U.S. rate hike. A report on U.S. retail sales will also be closely watched.
Elsewhere, UK data on inflation and employment will be in the spotlight amid ongoing concerns over the economic fallout from Brexit.