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Last Updated: Thursday, 16 February 2006, 18:01 GMT
China dollar holdings 'no risk'
Federal Reserve Chairman Bill Bernanke
Mr Bernanke is seen as a safe pair of hands by many investors
US Federal Reserve chairman Ben Bernanke says he sees no sign of a major shift in foreign central banks' plans to hold US dollar assets.

Speaking to the Senate, Mr Bernanke said even a moderate shift would not have a big impact on US asset values.

China's massive holdings of US dollar assets were not enough to put the US economy at risk, he said.

But he said it was in China's interest to move to a more flexible yuan exchange rate over time.

On the second day of his testimony to the Senate Banking Committee, Mr Bernanke said the US could not continue indefinitely to finance its current account deficit, which stands at a record 6% of national output.

"We should bring that down over time," Mr Bernanke said.

Meanwhile, he refused to be drawn on how much higher US interest rates would have to go.

"There are two possible mistakes. One is to go on too long and one is not to go on long enough," he said. "And it's a very difficult balancing act."

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