It will not surprise anyone in this room to know we have not found a “silver bullet”, although analysis continues. Besides retail investors, we have also seen the presence of institutions such as hedge funds engaged in the “carry” of funds borrowed in low yielding markets to invest in markets like New Zealand.
An unresolved debate is whether these hedge funds actually provide additional market liquidity for smaller economies or whether they effectively soak it up – particularly in troubled times. The role that these hedge funds can play at the stage where an  BIS Review 28/2008  1  over-valued exchange rate begins to adjust back to a more normal level is also unclear.