Investing.com - The yen surged to a more than three-week high against the dollar on Tuesday, after Japanese Prime Minister Shinzo Abe’s cabinet announced a fresh stimulus package as part of efforts to revive the flagging economy.
The package includes 13.5 trillion yen in fiscal measures, while actual new, direct spending will total about 7.5 trillion yen, most of it over the next two years.
While the headline figure for the package totals 28.1 trillion yen, it includes public-private partnerships and other amounts that are not direct government outlays and thus may not give an immediate boost to growth, according to market analysts.
The dollar hit lows of 101.53 against the yen, the weakest since July 11 and was last at 101.59 by 08:18GMT, or 4:18AM ET, down 0.81% on the day (USD/JPY).
Meanwhile, the dollar languished near five-week lows against its major rivals amid waning expectations that the Federal Reserve will raise interest rates anytime soon after data late last week showed the U.S. economy grew at a much slower rate than expected in the second quarter.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.35% at 95.41 early Tuesday, falling back towards a five-week low of 95.34 hit late last week.
Fed funds futures are currently pricing in just an 18% chance of a rate hike by September. December odds were at 43%, compared to 53% at the start of last week.
Investors looked ahead to key U.S. data later Tuesday to gauge the health of the world's largest economy and whether it is strong enough to warrant a rate hike later this year.
The Commerce Department will release its core personal consumption expenditure (PCE) index for June, along with personal income and spending for the same month at 12:30GMT or 8:30AM ET.