Yen fell in Asian trade on Tuesday against a basket of major rivals, extending losses for the third straight day against the dollar and about to trade below 162 yen per dollar for the first time since 1986 on bets the Bank of Japan won’t normalize the monetary policy this year after GDP contraction in the first quarter.

The yen pierced the 160 barrier against the dollar, and will potentially fall even below 163 then 165 as the Japanese government held off its intervention so far. 

The Japanese currency is also hurt by a spike in US 10-year treasury yields ahead of an important Federal Reserve’s speech later today.

The Price 

The JPY/USD rose 0.15% to 161.67, with a session-low at 161.41. 

The yen lost 0.4% yesterday against the dollar, plumbing 38-year lows at 161.73. 

The losses came after the Japanese economy shrank in the first quarter as US treasury yields gained ground.

Japanese GDP Shrinkage 

The Japanese government, in a rare unscheduled revision of GDP data, said the GDP shrank by more than expected in the first quarter.

The new data shows the GDP shrank by 2.9% y/y in the first quarter, compared to a 1.8% shrinkage reported earlier. 

In a technical memo, the government noted the revision is focused in particular on the weak construction sector. 

The data also showed factory activity was flat in June amid weak demand rising costs due to the weaker yen. 

The Japanese government appointed a new forex diplomat to oversee the market as the yen sustains heavy losses against major rivals. 

US Yields 

US 10-year treasury yields rose 0.1% on Tuesday, maintaining gains for the third straight session and almost touching four-week highs at 4.493%. 

The developments came ahead of Fed Chair Jerome Powell’s speech later this week in Portugal, which might include clues about the future of US interest rates.

According to the Fedwatch tool, the odds of a Fed 0.25% interest rate cut stood at 65%, and at 78% for November. 

Gold prices were little changed on Monday as the dollar stabilized against most major rivals today ahead of important payrolls data later this week.

The precious metal marked its first monthly loss since February in June as safe havens faced mounting pressures. 

Earlier US data showed the ISM manufacturing PMI fell to 48.5 last month from 48.7 in May, while analysts expected a rise to 49.2.

According to the Fedwatch tool, the odds of a 0.25% Fed interest rate cut in September hovered at 58.2%. 

Now the markets await Jerome Powell’s speech later this week in Portugal, in addition to the Federal Reserve’s meeting minutes, and the US payrolls report. 

Otherwise, the dollar index settled at 105.8 as of 21:19 GMT, with a session-high at 105.9, and a low at 105.4. 

On trading, gold spot prices stabilized at $2340.20 an ounce as of 21:19 GMT. 

Most US stock indices were mostly flat on Monday, the first session of July and the third quarter, as investors await important data this week.

It’s a truncated week to an official US holiday on Thursday for Independence Day. 

The next day, Wall Street will resume activities, with all eyes fixed on the payrolls report for June scheduled on Friday. 

On trading, Dow Jones rose 0.1%, or 27 points as of 16:25 GMT to 39,147, while S&P 500 fell 0.1%, or two points to 5459, as NASDAQ added 0.2%, or 41 points to 17,773. 

Bitcoin rose on Monday for the third straight session, hitting two-week highs amid a strong risk appetite in the market. 

The first round of the French parliamentary elections showed the far right won by a smaller margin than estimates in the polls, reducing concerns about the political situation in France. 

Recent US personal spending data also bolstered the case for two Federal Reserve interest rate cuts this year. 

Prices 

Bitcoin rose 1.7% today at Bitstamp to $63,724, the highest since June 23, with a session-low at $62,488.

On Sunday, bitcoin rallied 2.9%, the second profit in a row as risk appetite rebounds.

The world’s most valuable cryptocurrency lost 12% of its market value in the second quarter this year on profit-taking off a record high at $73,794. 

Crypto Market Value 

The market value of cryptocurrencies rose by $60 billion on Monday to a total of $2.465 trillion as both ethereum and bitcoin gained ground.

Positive Sentiment 

The initial round in France’s parliamentary elections showed the far right group “National Front” leading by a less than expected margin at 33.5%. 

The leftist coalition got 28.1% of the vote, while the Macron’s Centrist “Together” coalition got 20.7%. 

An overwhelming victory by the National Front would’ve threatened the implication of aggressive and expansionary financial policies in a country that already suffers from a heavy deficit. 

US Rates

According to the Fedwatch tool, there’s a 63% chance of a September rate cut by the Federal Reserve, and a 76% chance of a Fed rate cut.