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Currency wars are bringing little joy for New Zealanders but should we attempt to intervene?
The US dollar hit the skids this week, sliding to a five month low against the euro and two-year lows against a red hot aussie.
On the face of it, the fall can be put down to the repeated noises coming out of the US Federal Reserve about the likelihood of a second round of so-called quantitative easing.
QE, as it is known in the markets, is basically just money printing.
The Fed simply adds billions of new dollars to its balance sheet and then uses that money to buy US government bonds.
It does this to increase demand for the bonds which helps push down medium to long term interest rates, thereby further reducing the cost of borrowing and stimulating a weak economy.
So the theory goes at least.
Playing games
However it's unlikely that reducing interest rates is the only game being played by the US Fed at the moment.
Commentators around the globe are now speculating as to whether the new talk about QE is really just a ploy to help devalue the greenback and increase the competitiveness of US exports.
Printing money of course will increase the supply of US dollars in the system thereby reducing their scarcity and value.
Check out the Telegraph's Ambrose Evans Pritchard, he sums things up in an interesting fashion as usual.
And who could blame the US for trying to devalue when China, Japan, and many other major rivals are all now actively intervening in markets in an effort to keep their currencies low and their export sectors booming.
Export growth via a weak currency is the logical way (and in many cases the only way) for overly indebted, recession hit nations to get themselves out of trouble.
Hey, we are trying to grow exports in New Zealand too remember, just without the weak currency.
The problem is that not everyone can have a devalued currency. Someone's currency has also got to be rising, surely?
Up and down
For all the countries using a weak currency to racking up trade surpluses, there have to be others racking up deficits, don't there?
At the moment investors fleeing the US dollar are choosing to invest in gold (which hit new record highs this week), emerging economies and commodity-based currencies like the Australian dollar, the Brazilian real and New Zealand dollar.
And this week Brazil finally ran out of patience with its appreciating currency, going public with a declaration that the world was now in a currency war. And this from a country which already has capital controls in place.
Most in the markets won't be surprised by that assessment; currencies have long been used by nations in the battle for global economic dominance.
But it is telling for a country like Brazil to come out and be so explicit about it now.
So how does New Zealand fare in this race to have the weakest currency? Not particularly well, although I must say our exporters are at least pretty used to having deal with an overvalued exchange rate.
Cross rates
The current US dollar cross rate of around 0.74 US cents is not exceptional given our recent history, although it certainly seems pretty out of line given the weak GDP figures in New Zealand last week.
One would have expected in normal circumstances (and these aren't normal remember), to see our floating currency fall a bit more than it did last week to cushion the blow....
However, New Zealand has probably come off fairly well lately compared to some other commodity-based currencies like the Australian.
The aussie is at a two-year high against the greenback and is perhaps heading for parity with the US.
The flipside of this is that the kiwi, having not risen as much as the aussie, is now at close to a 10 year-low against the Australian dollar at 0.76 Australian cents.
So there is something for our exporters and tourist operators to smile about.
However it's not so great if you are heading to Australia for a holiday.
This trend could well continue for a wee while yet too, given Australia's likely to hike interest rates again this year and New Zealand is not.
Capital controls
Now if the US dollar weakness continues and the kiwi starts to breakout above 0.75 US cents then expect calls for intervention or capital controls in New Zealand to really ramp up.
While our Reserve Bank has tried and failed before...it doesn't mean people won't want them to try again.
In a currency war no one is going to do New Zealand any favours and it's a scary place for a small free floating currency to be.
Ultimately many will argue given our size and lack of reserves that there is little we can do.
That's certainly been the orthodox consensus among the experts up until now though that could be coming under pressure.
