SANTA BARBARA, Calif. — Federal Reserve Board chairman Ben Bernanke yesterday related the value of the dollar to the federal budget deficit, saying that the latter must be reduced to support the former.

Bernanke, answering questions following a speech to the Federal Reserve Bank of San Francisco’s Conference on Asia and the Global Financial Crisis, also said that Asian nations must be wary of the emergence of a new asset-price bubble.

He reiterated that China and other nations must do their part in reducing global imbalances, which he said played a role in causing the recent financial crisis.

Bernanke said they need to focus less on exports and more on domestic demand.

“In the case of the United States, we have a difficult fiscal situation,” he said. “I think it is important ... [and] policymakers need to recognize that we need to develop a fiscal exit strategy which will involve a trajectory for fiscal sustainability.”

“That’s clearly important to maintain confidence in our economy and confidence in our currency and so on,” Bernanke said

“That is well understood in Washington,” he added.

— Market News International

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