Bernanke says watching dollar drop closely

However, he said there were other factors helping to restrain inflation in the United States, and he repeated that the Fed is likely to keep interest rates exceptionally low for "an extended period."

In a rare commentary on the value of the dollar, Bernanke drew a link between its current weakness and inflation risks.

"We are attentive to implications of changes in the value of the dollar and will continue to formulate policy to guard against risks to our dual mandate to foster both maximum employment and price stability," he said in remarks prepared for delivery to the Economic Club of New York.

Fed officials usually defer to the Treasury secretary on issues relating to the dollar's value, but Bernanke noted that the currency's recent decline had been a factor helping to push commodity prices higher.

Bernanke said, however, that a high level of slack in the economy and stable longer-run inflation expectations should keep price pressures under wraps.

"On net, notwithstanding significant crosscurrents, inflation seems likely to remain subdued for some time," he said.

(Reporting by Mark Felsenthal; Editing by Andrea Ricci)