The dollar is falling after Federal Reserve Chairman Ben Bernanke says the central bank could provide more support for the economy if weak growth continues.
Bernanke says that support could include a third round of Treasury bond buying, also known as quantitative easing, which critics define as printing money.
In prepared remarks delivered before Congress on Wednesday, he warned that the Fed remains "prepared" to step in once again:
"Once the temporary shocks that have been holding down economic activity pass, we expect to again see the effects of policy accommodation reflected in stronger economic activity and job creation," he said
"However, given the range of uncertainties about the strength of the recovery and prospects for inflation over the medium term, the Federal Reserve remains prepared to respond should economic developments indicate that an adjustment in the stance of monetary policy would be appropriate."
Prominent analyst Simon Maughn Legendary investor Jim Rogers predicted another round of quantitative easing in interviews earlier this year.
“The bond market is going in one direction which is up-falling yields which is telling you quite clearly the direction of economic travel is downwards. Downgrades. QE3 (a third round of quantitative easing) is coming,” Maughn told CNBC in June. “The bond markets are all smarter than us, and that’s exactly what the bond markets are telling me.”
Rogers agreed: "They’re gonna bring [quantitative easing] back because [Bernanke will] be terrified and Washington will be terrified,” he said. “There’s an election coming in November 2012. Washington’s gonna print more money.”
But that policy has drastic consequences, including the devaluation of the dollar.
For example, the dollar dropped to 79.11 Japanese yen from 79.43 yen, but remained above a four-month low of 78.49 hit Tuesday.
The Associated Press contributed to this report.