The yen fell for a second day on Tuesday as calmer trading conditions prevailed before U.S. inflation data, while the pound rose after figures showed the British unemployment rate unexpectedly fell in June.

Currency markets have been rocked by a sharp rally in the yen since July that has prompted - and been driven by - an unwinding of a highly popular investment strategy called the carry trade and contributed to a slide in stocks.

Yet the dollar rose 0.33% against the yen on Tuesday at 147.71, a second straight rise, in a sign that markets appear to be over the worst of the recent turbulence.

The yen slid to 38-year lows in July as investors piled into the carry trade, where they borrow yen in Japan where interest rates are low, then sell it for other currencies to buy higher yielding assets elsewhere.

A number of factors, particularly a surprise rate hike by the Bank of Japan and expectations of U.S. rate cuts due to a slowing labour market, have combined to reverse the carry trade stampede, leaving the yen up around 8% since mid-July.

The dollar index was up 0.13% at 103.21 as investors waited for the figures, with the euro down 0.1% at $1.0922.

Sterling climbed 0.27% at $1.28 after data showed the UK's jobless rate fell to 4.2% in June from 4.4% in May, defying economists' expectations of a slight rise. Job vacancies declined while wage growth slowed.

Low survey response rates have recently caused investors and economists to put less weight on Britain's labour market data.

In other currencies, the Aussie dollar rose 0.27% to $0.6603. The dollar rose 0.21% against the Swiss franc, another currency that has rallied recently as investors have unwound carry trades.

Source : Reuters