Clearly an opinion....ie is it risk appetite or risk adverse or some mixture....ie investors leaving the USD for safer currencies unlikely to depreciate....So can we see some proof or justification please?

So long as majority of the consumers are happy, then who is going to rock the boat? Would definitions like exporters, deficit, imbalance, GDP, inflation, terms of trades, red in the book, etc. cause any concern to man in the street?

Roger Thompson,
To counter that, our monetary policy has to act ie. The Singapore model in a stabilising currency (even when USD has been falling). There are many countries out there which more or less follows the depreciation of USD and that help their terms of international trades, in particular export. But, who would bother to understand how detrimental when a country's currency is fluctuating by the day especially for overseas companies that might be considering to invest here? Some businesses just can't hedge much and needs a more stable currency environment to plan their operations, but are we able to attract productive investments here to create productive jobs when our currency is so volatile? we needed them most, aren't we? we needed that kind of productive job creations generated from demand, aren't we? are we stuffed? consumers aren't worried anyway! What about our policy makers?

I'd love think a New Zealand government could put together and implement the type of policy that Singapore has, but I just don't see it happening without massive social change over a generation. It wouldn't necessarily be a good thing either, as some of the things I really like about NZ (e.g. freedom, creativity) would have to go. Singapore is a package. If you pick one of their policies in isolation and try to implement it in NZ something would get lost in the translation.

Do we have the reserves to manage our currency? Remember how close we came to becoming a banana republic in the '80's.

I think everyone here is missing the point,

Regarding S'pore and NZ well its like comparing Pears and Picnics. It has taken S'pore well over 40 yrs to get where it has got with the same guy in Power for 27+ yrs. The Father of the Nation. Etc.etc.
The main industries being Shipping interests and petroleum products along with being a 1st Rate Financial centre. (Think about secret Swiss Bank accounts except change it too S'pore).

Its real asset is like every country its people, With strong Chinese mix. Ie one of the 4 Dragons along with Korea, Taiwan and Hong Kong. These are the main hubs for Chinese Goods.

Regarding NZ following S'pore is a bit like being told to run a race that is already one. The only thing I agree with is pegging our Dollar to a Basket of currencies like S'pore. Ie most stable (reliable) exchange rate in the World (I believe?).

But believe me when I say things are hurting in S'pore. Sure there GDP figures is up 15% but they are going through tough times there as well with lots of ex-pats leaving / left in droves. Mainly aligned to financial sector. With a lot getting wacked by with hefty tax bills on arrival to there respective countries.

Regarding NZ being a basket case currency well its a hell of a lot worse Outside NZ hence the rise of NZ $. Its not a rise of NZ $ but a huge devaluation / lose of confidence in all our trading currencies.

I believe the emphasis in valuing currencies is changing slowly from economic information too way of life, education of people , basically what peoples gut instincts are about a particular place and safety being a major one.

Its not a case of NZ being a basket case compared to the alternatives. Rest assured we are on top of the pile and guess what we did'nt have to do anything to get there, The rest of the world did it for us.

I believe its a case of when a new world currency will be implemented and in what form. At present I dont believe the US$ has the right to be called a reserve currency.
May sound like semantics but the rest of the World already agree and the case is strengthening day by day.

Or the other option, we have no Worlds reserve currency (I believe this is where we are at now) and people / Governments are trading in commodities or large scale bartering (tangiable assets).
Because believe it or not the Financial (artificial) economy has disappeared. They are trying to blow it up but its not there. Just an illusion its still there to be blown back up.

Its just us mere mortals that plod along.

Novo - you might want to check your maths on that. If the govt. debt is in NZ dollars then the exchange rate doesn't matter. If it is in foreign currencies, then a high NZ dollar means that repayments are cheaper.

Time for the RB to start selling NZ dollars perhaps (if they're not doing it already...)

And guess what, we can make as many NZ$ as we like, only builds our foreign reserves, I think that is called quantitative easing.....

John Walley,

You got a simply illustration and the answer is obvious. But, instead of using ratio, it might be easier for some to digest if you could put up the actual gdp per capita ratio. Perhaps, then those who used to see the bad side of other country might try to see the good policy of others. I could understand your illustration crystal clear, great sharing indeed.

Grandy, we should have something up on Interest , if Bernard will run it, by the end of this week.

Here's a thought...

Has Key got a lend of Bollard's ear? I wonder if the plan is to keep our interest rates low, whilst Oz raises theirs - thereby making us a less desirable place for the carry trade and hence the currency speculators. In that, driving up borrowing costs of our banks, as they borrow offshore.

This would serve a two-fold purpose, increasing interest rates for property investors, (trying to price them out of the market, then hit them with a property tax) and keeping a lid on our currency to a certain extent, making exporters happy.

This will also have some negative connotations, such as business lending will become much more expensive. But a good reform of the capital markets will make them a more desirable place to invest, hence easier equity raising. This is all very long term though.

With the US becoming less of a trading partner for us by the day, the main focus will be on cross rates between the NZD:AUD,RMB,JPY,EUR which to a certain extent will stay relatively stable under a policy such as above.

Just a thought.

I'd be happier for us to follow the Singapore system, and in more ways than their fiscal policies.... Death sentence for drug trafficers etc. but that's an argument for another day.

Selwyn,
I share your similar sentiment; can't see the logic except maybe to feel that (1) movement of Kiwi dollar is due to speculation as our currency (or reserve) base is too small compared to others, (2) their policy makers and authorities prefer to have a weaker and stable currencies respective to USD as they needed the exporting impact for growth. So as USD depreciates, their authorities might also ensure similar stability with their own currencies, hence following the falling trend although not as much as the USD's movements.

Hence, unless we are able to address the 2 points, we are left without much control. Maybe, to address point (1), we could print money; and to address point (2), I shall leave it to the monetary policy makers if they would.

While more countries are taking measures to counter the falling USD and stabilising their own currencies, countries which are not acting fast might end up seeing their own currencies propelling sky high..... So, who is affected?

Selwyn,
That's great, awaiting for your URL.
Just read news on nzherald that "National Health Board to see 500 jobs cut."
That's bad news for many.