For the Fed chairman to comment on currencies at all is highly unusual. By convention, the US Treasury Secretary is the sole US official who talks about the dollar.
Mr Bernanke’s comments came amid growing international unease about the weakness in the dollar, the global reserve currency, which forms a backdrop to President Barack Obama’s tour of Asia.
Liu Mingkang, China’s banking regulator, criticised the Fed at the weekend for fuelling the dollar carry trade in which investors borrow dollars at ultra-low interest rates and invest in higher-yielding assets abroad, creating the risk of new asset price bubbles.
The Fed chairman also indicated that the US central bank would not ignore the impact of rising commodity prices when evaluating the outlook for inflation. He said he would not rule out using interest rates to combat new asset price bubbles, even though he did not see obvious mispricing in the US at this stage.
This is all smoke and mirrors until and unless the derivatives market is regulated.