However, a more flexible exchange rate does not necessarily boost investor confidence as we have seen that most developing countries are currently trying to cope with the volatility of exchange rates. The pros and cons of moving to a more flexible exchange rate regime should be considered carefully. b.
The Reserve Bank reviews its exchange rate policy to ascertain its effectiveness and appropriateness in supporting its twin objectives of monetary policy – that is maintaining low inflation and maintaining an adequate level of foreign reserves. The Fiji dollar is pegged to a basket of five currencies (US dollar, Australian dollar, New Zealand dollar, Japanese yen and the Euro).