Washington Russia and China are advocating the creation of a new super currency, which Fed Chairman Ben Bernanke said Thursday would weaken the dollar if it were to be established.
“It would weaken the dollar, and we would have to watch for any inflationary consequences of that,” Bernanke said during the question and answer segment of a House Financial Services Committee hearing.
Bernanke added that the dollar is not at any immediate risk of losing its status as a reserve currency; he acknowledged, however, that if the U.S. doesn’t put its “economic house in order,” risk could eventually grow for the U.S. currency.
The dollar index, which measures the U.S. unit against a basket of six major currencies, stood at 77.117, compared with 77.047 in earlier trading.
Bernanke added that he believes the Fed can manage policies to support the U.S. economy without inducing inflation in the short term.
“We believe we have the tools and political will to achieve that,” he said.