The dollar sank across the board, hitting a new 26-year low against sterling, in the immediate aftermath of comments from Federal Reserve Bank chairman Ben Bernanke. The central bank chief said the Fed stands ready to counter the inflation risks caused by high oil prices — suggesting it could raise interest rates — but underlined the economic damage that oil prices could also provoke.
‘Further sharp increases in crude oil prices have put renewed upward pressure on inflation and may impose further restraint on economic activity,’ he said.
Rhonda Staskow at Thomson’s IFR Markets said: ‘There is no Goldilocks scenario from Bernanke, who sees risks from inflation and an economic slowdown – the worst of both worlds.’
At 15.15 GMT the dollar was trading around 1.4695 to the euro, from 1.4665 just before the details of the prepared comments were released.
The pound spiked above 2.11 usd before settling back to around 2.1090 usd.
The dollar was also weaker against the yen, Swiss franc and other currencies.