Dollar rebounds after Bernanke explains exit strategy

NEW YORK, Feb. 10 (Xinhua) -- The dollar rose slightly against most major currencies on Wednesday after U.S. Federal Reserve Chairman Ben Bernanke explained the central bank's economic stimulus exit strategy.

In response to the economic crisis, the Fed created a series of special lending facilities to stabilize the financial system and encourage the resumption of private credit flows, Bernanke said in a statement released on Wednesday. As market conditions and the economic outlook have improved, many of these programs have been terminated or are being phased out.

The economy continues to require the support of accommodative monetary policies, Bernanke said. The Federal Open Market Committee (FOMC), the decision-making body of the Fed, anticipates that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

However, the Fed has been working to ensure that we have the tools to reverse, at the appropriate time, the currently very high degree of monetary stimulus, according to the statement.

One such tool is reverse repurchase agreements (reverse repos), in which the Federal Reserve sells a security to a counterparty with an agreement to repurchase the security at some date in the future. The Fed is also developing plans to offer to depository institutions term deposits, which are roughly analogous to certificates of deposit that the institutions offer to their customers.

"We have full confidence that, when the time comes, we will be ready to do so," Bernanke said.

The Fed cut its benchmark rate to a historically low level of zero to 1/4 percent in December 2008 and has maintained the target range since then. The central bank also injected massive liquidity into financial system through special programs including short- term credits and security purchasing. There are concerns that it may pose long-term inflation risk if the central bank leaves a loose monetary policy for too long.

The euro bought 1.3736 dollars in late New York trading compared with 1.37751 dollars it bought late Tuesday. The pound fell to 1.5589 dollars from 1.5688 dollars.

The dollar fell to 1.0617 Canadian dollars from 1.0689 Canadian dollars, and rose to 1.0678 Swiss francs from 1.0656 Swiss francs. It rose to 89.90 Japanese yen from 89.63 Japanese yen.