Ella 
The Japanese yen (JPY) extended gains for the third straight session on Wednesday as risk-averse flows returned. Markets are expecting the Bank of Japan (BoJ) to raise interest rates at its policy meeting next week, which will prompt shorts to exit the market and provide support for the yen.
Japan’s ruling party senior official Toshimitsu Motoki urged the Bank of Japan to more clearly communicate its plans to normalize monetary policy through gradual rate hikes, according to Reuters. Prime Minister Fumio Kishida added that the central bank’s monetary policy normalization will support Japan’s transition to a growth-driven economy.
The U.S. dollar (USD) faces challenges as bets on a September rate cut by the Federal Reserve (Fed) rise, which put downward pressure on USD/JPY. According to the CME Group’s FedWatch Tool, the market now shows a 93.6% probability of a 25 basis point rate cut by the Fed at its September meeting, up from 88.5% the day before.
Traders are awaiting U.S. Purchasing Managers’ Index (PMI) data due on Wednesday and second-quarter gross domestic product (GDP) annual rate data due on Thursday. The data is expected to provide new insights into the state of the U.S. economy.
