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Wednesday, June 4, 2008

PIMCO's Gross: Bernanke injects dollar emphasis | Reuters

NEW YORK (Reuters) - U.S. Federal Reserve Chairman Ben Bernanke appears to have raised the issue of the dollar's value against other currencies as an important factor in future interest rate decisions, the manager of the world's largest bond fund said on Tuesday.

"By emphasizing the dollar, a role previously assigned to the Treasury secretary, (Bernanke) seems to have injected a new policy constraint that may increase in importance as a determinant of future interest rate changes," said Bill Gross, chief investment officer of the Pacific Investment Management Co., or Pimco. Pimco has about $812 billion in assets under management.

The Fed chairman on Tuesday issued a rare warning about the risk a weak dollar poses in fueling inflation.

"We are attentive to the implications of changes in the value of the dollar for inflation and inflation expectations," Bernanke said by satellite to a conference on monetary policy in Barcelona, Spain.

He added that the Fed and the U.S. Treasury were continuing to "carefully monitor" currency market developments.

U.S. officials usually defer on any comment on the value of the dollar to the Treasury secretary, and analysts said the central bank chairman's remarks were highly unusual.

Traders said his comments suggest the Fed has shifted its focus and now sees the weak dollar primarily as a threat to inflation rather than a helping hand for exporters and growth.

The dollar rose sharply against all the major currencies after Bernanke's remarks, with the euro at one point falling nearly full two cents against the U.S. currency.

Gross' comments were emailed to Reuters in response to Bernanke's speech on Tuesday.

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