When the dollar falls, foreigners might be expected to dump fixed-income assets like bonds and buy stocks - especially now that stock markets are strengthening.

They ignore the risk that rising interest rates will make a bank's fixed-income assets less valuable.

The fixed-income assets, Mr. Taylor said, are to provide steady current revenue and quick access to funds in case of emergencies.

He knew it would be possible to do this with fixed-income assets, like bonds.

But traders, who despise inflation because it erodes the value of fixed-income assets, said the price numbers were not of primary concern at the moment.

"There hasn't been any panic, and we haven't seen a tremendous amount of shifting into fixed-income assets like money market accounts."

Lower inflation is desired by bond holders because it increases the real rate of return on fixed-income assets.

Bondholders do not like to see the value of their fixed-income assets decline and will sell at the first sign of higher inflation.

In the three quarters beginning last October, however, net purchases of fixed-income assets rose by more than $100 billion, to $650 billion.

In addition, the lower inflation falls, the greater the real rate of return on a fixed-income asset or investment.