Bloomberg: Dollar Climbs to Three-Month High as Bernanke Sees Lower Risks to Economy

[krakknisse]

Trust Bernanke to talk up the US dollar. He gets fawning coverage in the MSM. Take a look at the charts below.

Dollar Climbs to Three-Month High as Bernanke Sees Lower
Risks to Economy
June 10 (Bloomberg) -- The dollar rose to a three-month high against the yen and climbed versus the euro after Federal Reserve Chairman Ben S. Bernanke said economic risks have faded, spurring traders to boost wagers interest rates will rise.

The U.S. currency gained after Bernanke said late yesterday that the central bank will ``strongly resist'' any waning of public confidence in stable prices. Canada's dollar erased losses as the Bank of Canada unexpectedly held rates at 3 percent to counter inflation.

Whoo hoo! Talk about a strong dollar policy. Bernanke is here to save us - LOOK at how big the red blip is! He's taken us all the way back to the strong US dollar days back in - wait, March! Finally some strong-arm action. When will we see the first Bernanke action hero? (A minority might prefer to see a comic figure with a red nose).

Seriously, when will we see the real headline:

Bloomberg (June 2010): Bernanke blamed for US dollar rout, defends himself. In his recently published memoirs, published just three months after his ouster as Chairman of the Federal Reserve Board, Bernanke voices his opposition the widespread blame he attracted for the demise of the US dollar as reserve currency and a major commodities currency. An extract: "The Federal Reserve board policies under my tenure followed standard well-researched policies that had been successful in many recessions. Ultimately, loss of trust in the US consumer by over-saving and resurgent Asians brought the dollar down. I had to handle a difficult legacy, and faced significant opposition. I did the best I could.".

and a longer perspective:

[*T*]

Re: Bloomberg: Dollar Climbs to Three-Month High as Bernanke Sees Lower Risks to Econ

Yep - and hasn't his jawboning hammered gold? It's down to levels we haven't seen since - ooh - last week!

[Slimprofits]

Re: Bloomberg: Dollar Climbs to Three-Month High as Bernanke Sees Lower Risks to Econ

Bloomberg: Global Central Banks Halt Rate Cuts on Inflation Risk - June 10th

With the International Monetary Fund forecasting the fastest global inflation in 13 years for 2008, global interest rates may have bottomed even as the outlook for growth remains weak.

Timothy Geithner, President of N.Y. FED: Reducing Systemic Risk in a Dynamic Financial System - June 9, 2008 N.Y. Economic Club

The structure of the financial system changed fundamentally during the boom, with dramatic growth in the share of assets outside the traditional banking system. This non-bank financial system grew to be very large, particularly in money and funding markets. In early 2007, asset-backed commercial paper conduits, in structured investment vehicles, in auction-rate preferred securities, tender option bonds and variable rate demand notes, had a combined asset size of roughly $2.2 trillion. Assets financed overnight in triparty repo grew to $2.5 trillion. Assets held in hedge funds grew to roughly $1.8 trillion. The combined balance sheets of the then five major investment banks totaled $4 trillion.

In comparison, the total assets of the top five bank holding companies in the United States at that point were just over $6 trillion, and total assets of the entire banking system were about $10 trillion.

[..]

...these assets were assumed to be readily sellable at fair values, in part because assets with similar credit ratings had generally been tradable during past periods of financial stress. And the liquidity supporting them was assumed to be continuous and essentially frictionless, because it had been so for a long time.

[..]

We are in the process of encouraging a substantial increase in the resources held against the risk of default by a major market participant across the set of private sector and cooperative arrangements for funding, trading, clearing and settlement of financial transactions that form the "centralized infrastructure" of the financial system. We have begun to review how to reduce the vulnerability of secured lending markets, including triparty repo by reducing, in part, the scale of potentially illiquid assets financed at very short maturities.

[..]

...we need to make it much more difficult for institutions with little capital and little supervision to underwrite mortgages, and we need to look more comprehensively how to improve the incentives for institutions that structure and sell asset-backed securities and CDOs of ABS. And supervision will have to focus more attention on the extent of maturity transformation taking place outside the banking system.

[..]

Inducing institutions to hold stronger cushions of capital and liquidity in periods of calm may be the best way to reduce the amplitude of financial shocks on the way up, and to contain the damage on the way down.

[..]

The most fundamental reform that is necessary is for all institutions that play a central role in money and funding markets—including the major globally active banks and investment banks—to operate under a unified framework that provides a stronger form of consolidated supervision, with appropriate requirements for capital and liquidity.

[..]

It would be helpful for the Federal Reserve System to have greater flexibility to respond to acute liquidity pressure in markets without undermining its capacity to manage the federal funds rates at the FOMC's (Federal Open Market Committee) target. The authority Congress has granted the Fed to pay interest on reserves beginning in 2011 will be very helpful in this regard. We welcome the fact that Congress is now considering accelerating that authority.

The major central banks should put in place a standing network of currency swaps, collateral policies and account arrangements that would make it easier to mobilize liquidity across borders quickly in crisis.

Bloomberg: Fed's Fisher Says Higher Rates May Be Needed to Curb Inflation - June 9th

``It's something that I think a lot of monetary authorities will have to come to grips with,'' Fisher said of inflation during an interview with CNBC today. ``The question is how and when.''

Fisher supported remarks made earlier today by New York Fed President Timothy Geithner, who told a New York audience that ``tighter monetary policy'' may be needed globally. The 59-year- old Dallas Fed chief is the only member of the Federal Open Market Committee to dissent three times this year from decisions to lower the overnight bank-lending rate, favoring either no change or less aggressive reduction.

Bloomberg: Two-Year U.S. Notes Drop Most Since 1996 on Fed Rate Outlook - June 9th