Lenin was right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency.

-- John Maynard Keynes

What will Ben Bernanke's stance on the dollar be? That question has haunted foreign exchange markets since his appointment Monday to replace Alan Greenspan as Federal Reserve chairman.

Of course, the "haunting" was limited because Bernanke still has to clarify what his official stance will be, and that may differ radically from his previous thoughts on the matter.

In addition, the dollar policy falls under the realm of the Treasury Department, not the Fed. But the fate of the greenback is implicitly intertwined with monetary policy. A strong dollar keeps inflation at bay by lowering the cost of imports, while a weak dollar can boost the economy by fueling exports and inflating overseas profits. The Fed's twin policy mandates are price stability and full employment.

On Monday, the dollar dipped as news agencies reported Bernanke's imminent appointment. The dollar then bounced back, after confirmation of the news, as Bernanke guaranteed "continuity with the policies and policy strategies under the Greenspan era."

The dollar has been supported this year by the Fed's unwavering commitment to continue raising short-term rates. Fed tightening means more attractive yields in short-term Treasuries vs. their foreign counterparts, encouraging foreign flow of capital into the U.S.

The dollar was down again Tuesday, although traders attributed the move to euro strength overnight following strong gains in Germany's Ifo survey of business sentiment. But in a sign of ongoing uncertainty about Bernanke's commitment to keep up the fight against inflation, gold surged more than $7 to $474.20 an ounce.

Likewise, the 10-year Treasury was recently down 7/32 while its yield, which moves inversely, rose to 4.47%. The benchmark note fell 15/32 on Monday.

Major averages, meanwhile, were taking a breather after Monday's furious rally, thanks in part to disappointing earnings from Texas Instruments ( TXN) and DuPont ( DD). The Dow Jones Industrial Average was recently down 0.5% to 10,338, the S&P 500 was off 0.7% to 1190.85, and the Nasdaq Composite was down 0.9% to 2097.73.

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