Bernanke Talk of Inflation Vigilance Supports Dollar – Fed Teetering on the Tightrope
Jun 4th, 2008 | By Doug Casey | Category: US Dollar & Forex TradingIn the currency market, the dollar was sharply higher against the euro. Late Tuesday, the euro was trading at $1.5434 vs. $1.5536 on Monday.
As noted, Bernanke’s words gave a big boost to the buck. The weak U.S. currency has “contributed to the unwelcome rise in import prices and consumer-price inflation,” Bernanke told an international bankers forum.
The Fed is “attentive to the implications of changes in the value of the dollar for inflation and inflation expectations, and will continue to formulate policy to guard against risks” to price stability and sustainable growth, Bernanke said.
“Bernanke’s defense was about as strong as he could make it, given the U.S. policy of letting only the U.S. Treasury Secretary speak about matters concerning the dollar,” said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co.
However, as Peter Schiff, president of Euro Pacific Capital, points out, only imposing sharp interest-rate hikes and curbing the rate of growth in the money supply will strengthen the dollar and cut inflation. And those could kill off any economic recovery.
That leaves the Fed to walk the tightrope between the rock and the hard place. Some observers were speculating that the tough talk could be followed with Washington intervening in currency markets by buying dollars and selling other currency, a prospect one analyst believes could happen as early as today.
Source: Bernanke Talk of Inflation Vigilance Supports Dollar – Fed Teetering on the Tightrope
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