And if the currently-low exchange rate does in fact produce the reduction in the balance of payments deficit which seems likely, then in due course the confidence of both local and overseas investors in New-Zealand-dollar-denominated assets will return, and some appreciation of the exchange rate with it. Why doesn’t “somebody” do something about the low exchange rate?
Well, rather than waiting for that return of confidence, or for a reduction in the extent to which the US is dominating investors’ radar screens, is there anything which might be done to reverse the decline in the exchange rate more quickly, if that were thought desirable? In principle, there are three things that might be done to try to achieve this objective.