Bernanke: we will aim for a strong dollar
BEN BERNANKE, chairman of the Federal Reserve, took the unusual step of commenting on the direction of the US dollar last night, saying he was “attentive” to the currency’s ongoing slide.
The Fed chairman does not normally comment on the direction of the US dollar, so Bernanke’s comments were scrutinised across global markets.
The US dollar has dropped 13 per cent against the pound so far this year and is at its lowest point in 15 months against a basket of six major currencies.
Bernanke said: “We are attentive to the implications of changes in the value of the dollar and will continue to formulate policy to guard against risks to our dual mandate to foster both maximum employment and price stability.”
He said: “Our commitment to our dual objectives, together with the underlying strengths of the US economy, will help ensure that the dollar is strong and a source of global financial stability.”
His comments sparked an initial jump in the US dollar, especially against the euro, but the Fed’s stance on keeping interest rates at record lows prevented any significant rally.
Currency analysts said Bernanke’s comments would not boost the dollar in the absence of action on interest rates.
Vassili Serebriakov, a currency strategist at Wells Fargo said: “The forex markets certainly took note of chairman Bernanke’s dollar comments. Yet, in the absence of any notable shift on the policy front we doubt that ‘official’ jawboning can do much to reverse the current trend.”
As economies around the world have rebounded this year, investors have been selling greenbacks to fund the purchase of higher risk assets, a trend that looks unlikely to change by the end of 2009.