In the SMH today:
A big part of yesterday's Sydney board meeting was given over to discussing the high dollar and what - if anything - to do about it. One option - not ruled out - is to intervene in the foreign exchange market by selling dollars and buying foreign currency as the central bank has done on rare occasions in the past.
This option carries a risk of being stuck with foreign assets that would turn out to be bad investments, a criticism that can be levelled at China's policy of investing abroad in order to hold back its currency. The Reserve is taking the view for the moment that there is little evidence of broad economic damage flowing from the high dollar, meaning it can wait. Economic growth is strong, employment is climbing and inflation is low. If needed, the Reserve would restrain the dollar in other ways, by feeding concern about the high dollar into its decisions about whether to cut interest rates; in the same way as it feeds concern about bank funding costs into those decisions.
For the moment it is watching the dollar, letting people know it is watching the dollar, and keeping its options open.
