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A strong and stable dollar is both in the American interest and in the interest of the global economy, the US Federal Reserve Board Chairman, Mr Ben Bernanke, has said.
“The Federal Reserve believes that a strong and stable dollar is both in American interests and in the interests of the global economy. There are many factors that cause the dollar to move up and down over short periods of time,” Mr Bernanke told reporters at his first-ever news conference here on Wednesday.
Over the medium term, the US is doing two things.
“First, we are trying to maintain low and stable inflation by our definition of price stability, by maintaining the purchasing value of the dollar, keeping inflation low. That’s obviously good for the dollar,” he said.
“The second thing we’re trying to accomplish is to get a stronger recovery, and to achieve maximum employment. And again, a strong economy growing attracting foreign capital is going to be good for the dollar,” Mr Bernanke said in response to a question.
“So in our view, if we do what’s needed to pursue our dual mandate of price stability and maximum employment, that will also generate fundamentals that will help the dollar in the medium term,” he said.
One factor that has caused fluctuations in the dollar value has been the safe-haven effect.
“So, for example, during the height of the crisis in the fall of 2008, money flowed in to the treasury markets and drove up the value of the dollar quite substantially, reflecting the fact that US capital markets are the deepest and most liquid in the world,” he said.
“A lot of what you’ve seen over the last couple of years is just the unwinding of that as the economy has strengthened and as uncertainty has been reduced. But that’s indicative, I think, of the high standing that the dollar still retains in the world,” the Fed Chairman said.
“Ultimately, the best thing we can do to create strong fundamentals for the dollar in the medium term is to first keep inflation low, which maintains the buying power of the dollar; and second, to create a strong economy,” he argued.
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