Yen Gains as Japan Averts Recession

The yen picked up Tuesday after better-than-expected Japanese growth data eased worries about the economy, and lowered expectations of more Bank of Japan stimulus in the near term.

Japan sidestepped its second recession in as many years after the revised figures published Tuesday showed that the gross domestic product (GDP) actually expanded by 0.3 percent in July-September.

Initial estimates pointed to a contraction for a second-straight quarter, putting the country in recession.

The weakness had stoked speculation that the BoJ would be forced to expand its massive 80 trillion yen annual stimulus programme -- a move that would tend to weaken the yen.

The central bank holds its last meeting of 2015 next week, when it is also scheduled to release its closely watched Tankan business sentiment survey.

"The Bank of Japan will likely leave policy settings unchanged...unless next week’s Tankan (survey of business confidence) disappoints significantly," research house Capital Economics said in a commentary.

"However, we still think that underlying inflation will moderate in coming months, which would put the Bank under renewed pressure to step up the pace of easing."

In Tokyo, the dollar slipped to 123.11 yen from 123.36 yen Monday in New York, while the euro edged down to 133.55 yen from 133.67 yen.

The single currency also changed hands at $1.0848, up from $1.0835.

The dollar was likely to rally, however, as the Federal Reserves moves ever closer to its first interest rate hike in nine years, said Yosuke Hosokawa, head of the forex sales team at Sumitomo Mitsui Trust Bank.

"Buying back the dollar is likely as everybody now believes a Federal Reserve interest rate hike is guaranteed," Hosokawa said.

On Friday, U.S. official data showed more than 200,000 new jobs were created in the United States in November, reinforcing the view that the world's top economy was in recovery.

The Fed holds its next policy meeting next week.

Commodity-linked currencies, including the Australian dollar and Malaysian ringgit, took a hit after oil prices plunged to a seven-year low.

The Aussie weakened 0.10 percent against the greenback while the ringgit was down one percent.

The precipitous drop in oil prices came after the Organization of the Petroleum Exporting Countries (OPEC) failed to reach an agreement on cutting output despite a global supply glut.

In other trading, the South Korean won fell 0.57 percent on the dollar, while the Indonesian rupiah gained 0.27 percent and the Thai baht ticked up 0.03 percent.