Yen Surges Amidst Market Volatility and Fed Rate Cut Expectations

The U.S. dollar faced significant losses while the yen weakened after an earlier rise. The market turbulence follows disappointing U.S. job data, earnings, and concerns over the Chinese economy. Central bankers downplayed recession fears but highlighted rate cuts. The yen's value fluctuated due to the Bank of Japan's recent rate hike.

The U.S. dollar was struggling with significant losses on Tuesday, while the yen weakened after a sharp rise in the previous session. This came as traders dealt with the unwinding of popular carry trades and anticipated deep rate cuts from the Federal Reserve.

Weak U.S. job data, poor earnings reports from major tech firms, and growing concerns about the Chinese economy sparked a global sell-off in stocks and high-yielding currencies. The rush to exit riskier assets intensified on Monday amid fears of a U.S. recession.

Policymakers from the U.S. central bank countered recession fears on Monday but warned that rate cuts might be necessary to prevent such an outcome. Traders expect 110 basis points of easing from the Fed this year, with a 50 basis points cut likely in September. The yen's rise follows Japan's recent interest rate hike and the unwinding of carry trades.

(With inputs from agencies.)