It's Uncle Ben versus the Ferocious Fundamentals.

The dollar rose more than 1.7 cents against two other major currencies Tuesday -- a large move in the currency market -- after U.S. Federal Reserve Chairman Ben Bernanke said the world's most important central bank will "strongly resist" any dip in public confidence in stable prices, Bloomberg News reported.

Traders interpreted Bernanke's comments as renewed Fed attention to oil-induced, rising U.S. inflation, and bought the dollar, sending it higher Tuesday at mid-day. The dollar strengthened 1.7 cents to $1.5477 versus the euro, 2.1 cents to $1.9540 versus the British pound, and almost 1 yen to 107.19 versus Japan's yen.

A 'dollar skeptic'

Further, although Chicago Board of Trade futures calculate a 55% chance of a Fed quarter-point interest rate increase in its benchmark rate when it meets next on August 5, currency trader Andrew Resnick remains a doubter.

"I'm a dollar skeptic. We've been down this road before. Many times. Fed officials hit the news wire with tough talk on inflation, a day or two passes, then bearish dollar fundamentals reassert themselves," Resnick said. "Everyone recognizes and appreciates Bernanke's role in making clear there are limits to inflation, but there won't be a change in the dollar-lower trend until U.S. economic fundamentals improve." Resnick added that he is presently flat, or has no open currency trading positions.

One fundamental is showing improvement, Resnick said -- the U.S. trade deficit. The trade deficit rose to $60.9 billion in April, the U.S. Commerce Department announced Tuesday, but after controlling for inflation, the trade deficit fell to $46.9 billion, its lowest level in about five years. "If U.S. exports continue to strengthen the trade gap will continue to shrink, and that's a positive for the dollar," Resnick said.

The other hurdles? The federal budget deficit and U.S. economy. Resnick says no Congressional Democrat / Bush Administration action is expected on the projected $403 billion fiscal 2009 budget deficit, due to the upcoming November 2008 election, and the economy is showing few signs of a recovery. It will be hard for the dollar to sustain a rally before the trend lines for each begin to move in a positive direction, he said.