Bernanke: Fed is monitoring changes in dollar's value

The currency markets, at least initially, shrugged-off Bernanke's comments, with the dollar weakening about 1 cent versus the euro to $1.5005 and about 1.75 cents versus the British pound to $1.6853, as confidence in the global recovery, among other factors, continued to push capital out of the dollar safe haven and into higher-return assets.

Further, Bernanke added that the Fed will continue to monitor the dollar, and the foreign exchange, more broadly: "We are attentive to the implications of changes in the value of the dollar and will continue to formulate policy to guard against risks to our dual mandate to foster both maximum employment and price stability. Our commitment to our dual objectives, together with the underlying strengths of the U.S. economy, will help ensure that the dollar is strong and a source of global financial stability," Bernanke said.

Monetary/Fiscal Analysis: Interpret Bernanke's comments as the Fed is aware of institutional investor and foreign nation concerns about a potential precipitous slide in the dollar. Taken together with talk that the Obama administration is considering a 5% budget cut for most federal programs, the two data points telegraph to the markets that the notion that both the Fed is powerless to stop the dollar's depreciation and/or that fiscal policy is 'out of control' are decidedly incorrect. The two salvos put all in the investment community on notice that United States policy makers, in conjunction with the nation's productive capacity and resilient economic system, retain at their disposal the resources, policy options, and actions needed to strengthen the dollar.