Hard to know where US dollar headed-Feds Pianalto

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CLEVELAND, Feb 20 (Reuters) - So many variables affect thevalue of the U.S. dollar that it is hard to know where thegreenback is headed, Cleveland Federal Reserve Bank PresidentSandra Pianalto said on Saturday.

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Taking questions after addressing a group of high schoolstudents, Pianalto, a voting member of the Fed"s policy panelthis year, was asked what policies were being put in place tosafeguard the dollar"s value.

Pianalto noted that dollar policy was not under the purviewof the Federal Reserve, but added: "The value of the dollar isset by the markets and there are so many variables. It is justvery hard to know what direction it is going to go."

U.S. dollar policy is directed by the Treasury Department.

Asked about the Fed"s decision to increase the interestrate it charges banks for emergency loans, Pianalto describedit as response to improving market conditions.

"As the credit situation improved and the financial marketsimproved ... we tried to get it so the banks would access thosefunds in the market," she said.

The Fed said on Thursday it was raising the so-calleddiscount rate by a quarter point to 0.75 percent.

It made no move in the federal funds rate governingovernight lending between banks, which can broadly influencecredit costs and has been the Fed"s main monetary policy tool.That rate still stands in a zero to 0.25 percent range.

Pianalto did not address the outlook for the economy ormonetary policy in her remarks, and largely sidesteppedquestions on fiscal policy, which she said was not the Fed"sdomain.

"It is important to step back and come out of thisrecession with recovery and to make sure that the correctfiscal policy is created," she said.

The Obama administration has forecast a record $1.56trillion budget deficit this year. At 10.6 percent of GDP, itwould be the largest deficit since 1945. (Reporting by Kim Palmer; Editing by Peter Cooney)

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