Dollar Index Tumbles Amid Japanese Yen Strength

The US dollar index DXY fell to a two-week low on Tuesday and finished down by -0.38%. The decline came as the Japanese yen rallied to a six-and-a-half-month high against the dollar, driven in part by positive economic news from Japan.

The yen's strength was fueled by a revision upward of Japan's Q2 GDP to 1.4% (q/q annualized), which exceeded expectations of 1.8%. Additionally, the Japan Aug Eco Watchers outlook survey rose 2.5 to 48.3, stronger than forecasts of 46.4.

The yen also found support from speculation that the Japanese Government Pension Investment Fund may shift its allocation to more Japanese government bonds, which would boost the currency's value. Furthermore, increased expectations of a BOJ rate hike later this month added to the yen's underlying strength.