Bernanke says dollar to stay main reserve currency
WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke on Thursday played down concerns that the slumping U.S. dollar was losing its place as the world's reserve currency, but acknowledged it could make imported goods more expensive for American consumers.
Facing a barrage of questions from lawmakers about the threat posed by the weak dollar, which hit a fresh low against a basket of currencies on Thursday, Bernanke said the currency's value was dependent on the U.S. economy's health.
"I don't see any significant change in the broad holdings of dollars around the world. Dollars remain the dominant reserve asset and I expect that to continue to be the case," Bernanke told the congressional Joint Economic Committee.
Bernanke assured members of Congress that the Fed was paying close attention to the dollar's slide "primarily as it affects the U.S. economy."
"The decline of the dollar has the potential to raise import prices and contribute to inflation and therefore we are very attentive to that risk. We're going to make sure that the inflationary impact that may come from the weakening dollar is not passed into broader prices and become part of the underlying inflation rate," he added.
This week, a Chinese official said the country's foreign exchange policy should "take advantage of the appreciation of strong currencies to offset the depreciation of weak currencies," stoking concerns that China would curb its purchases of the U.S. dollar and dollar-denominated assets.
Bernanke said the comment was not an official government statement and that he was "not particularly concerned about any major change in the holdings of China or any other country."
He said the dollar's strength in the medium term would ultimately depend on the state of the U.S. economy, global trade, and ensuring that U.S. financial markets are open to foreign investment.
"I'm optimistic on those fronts, and I do believe that will lead to a sound dollar in the medium term," Bernanke said.
(Reporting by Emily Kaiser and Joanne Morrison; Editing by James Dalgleish)
