Fed Comments Punish Dollar

A recent speech by Ben Bernanke, chairman of the US Federal Reserve Bank, sent the Dollar spiraling downward to fresh lows against all of the world's major currencies.  This is perhaps surprising, given that Bernanke used the speech to warn that higher-than-expected inflation may drive the Fed to hike rates, which is exactly what Dollar bulls wanted to hear.  The downside of the speech, reflected in the markets' reaction, was that the primary cause of the inflation is rising oil prices, would could plunge the US economy into stagflation: slow growth and high inflation, an unenviable position if there ever was one.  Forbes reports:

Rhonda Staskow at Thomson's IFR Markets said: 'There is no Goldilocks scenario from Bernanke, who sees risks from inflation and an economic slowdown - the worst of both worlds.'

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