In a global foreign exchange market which turns over around $US1.5 trillion a day, the New Zealand dollar is sometimes thistledown in a gale.
This is one of those times.
One reason the New Zealand dollar has tumbled is simply that it is not the almighty United States dollar, at a time when US equity markets look like the only game in town to international investors.
But US dollar strength provides only a partial alibi.
The kiwi has also dropped 4.5 per cent on the trade-weighted index over the past two days, and 1.7c against the also-battered Australian dollar.
There is some comfort perhaps in the fact that dealers report relatively light volumes, so that the present prices can be seen as reflecting less an avalanche of selling than a prudent retreat to the sidelines by buyers.
The prevailing view is that the market is driven by considerations of relative economic growth prospects, and no one else looks good in comparison with the US.
If that is so, it is worth reflecting on what the Federal Reserve's open market committee said on Tuesday.
It said that demand in the US economy was moderating, and that nevertheless the inflation risks were on the upside.
That sounds like a scenario of slower growth either spontaneously or from higher interest rates on the other side of the November election.
New Zealand's growth prospects, by contrast, would seem to be on the up and up, if only because it would be off the present subdued base.
Growth differentials, in other words, may move in New Zealand's favour by the end of the year, and the currency with it.
Last week, the Reserve Bank cited the possibility that the exchange rate would not appreciate, or might even fall, as a key risk to its projections.
If the currency settles near present levels, the bank will have to figure out how much extra boost it provides to the export sector and ultimately the rest of the economy.
Offsetting that stimulus will be the bigger bite petrol prices take out of households' disposable incomes.
The bank, like private sector economists, is struggling to explain the economy's "muted" response so far to what is already a three-year-old depreciation.
The weak dollar does not make grass grow faster.
Nor does it make Thames-assembled cars more competitive when they are no longer assembled there.
What it will do is add to the inflationary pressure already in the pipeline, and the risks of secondround inflation if wage and price setters try to dodge the dismal reality that we are all worse off by passing higher costs to their customers or employers.
On that point, Reserve Bank governor Don Brash has been sternly clear: We can run but we can't hide.
<i>Between the lines:</i> When the buck hasn't stopped here ...
AdvertisementAdvertise with NZME.