On the other hand, resources shifted to the more sheltered and less competitive non-tradables sector where producers find it easier to raise prices. The high exchange rate does however, generate some important benefits to the economy. Consumers and producers benefit from lower import prices, and interest rates are lower than would otherwise be the case.
The Reserve Bank wishes to see a lower exchange rate provided it can be achieved without damaging price stability and financial stability. In the wake of the global financial crisis, institutions such as the IMF, are reviewing the scope for managing capital flows.