Bernanke attacks Chinese forex trading

The head of the US Federal Reserve has attacked forex trading patterns that he believes are hurting his country's economic recovery.

Ben Bernanke was referring to states such as China when he told the European Central Bank that "currency undervaluation by surplus countries is inhibiting needed international adjustment."

He added that the Chinese policy of building up dollar reserves to weaken its own currency in the forex trading would lead to a two-speed recovery.

This would lead to developing countries like China and India bouncing back much quicker than industrialised economies like the US and Europe.

Mr Bernanke's speech came as Beijing announced that its banks must increase the amount they hold in reserve in order to counter inflation in the country, which has recently jumped to 4.4 per cent.