Shocker: Bernanke Comments on the Dollar

It's the treasury secretary who talks about the dollar, not the Federal Reserve chairman. So it was notable that Ben Bernanke explicitly mentioned it four times in a speech today. A couple of takes on his comments, first from economist Michael Feroli of JPMorgan:

The real bombshell in today's talk came in Bernanke's discussion of the dollar's role in the Fed's policy response. "In collaboration with our colleagues at the Treasury, we continue to carefully monitor developments in foreign exchange markets." The Treasury-Fed Accord specifies a division of labor between those two institutions whereby the Treasury is responsible for the foreign exchange value of the dollar and the Fed is responsible for interest rates.... Bernanke went on the note that "We are 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 both parts of our dual mandate, including the risk of erosion of longer-term inflation expectations." He concluded by noting that Fed policy will be one of the factors "ensuring that the dollar remains a strong and stable currency." The Fed last intervened in [foreign exchange] markets on September 22, 2000, when it and the Treasury jointly purchased 1.5 billion euros to support that currency.

And this from Michael Darda of MKM Partners:

Bernanke came out forcefully for a "strong and stable" dollar with the implication that the foreign central banks and the U.S. Treasury stood ready to help the Fed deliver it. Not since the days of the Louvre Accord more than 20 years ago has the Fed drawn an explicit line in the sand against the weakness of the dollar. If the dollar continues to rise in the near term, it would take some pressure off the consumer and financial sectors, which tend to be hurt the worst by rising inflationary pressures. Technology and transports would seem the most attractively positioned to benefit from the emergence of dollar stability.