SO NOW we know what Finance Minister Michael Cullen’s options are to curb the high dollar. Sort of.

It has been a long journey to revelation since November 5 when Doctor No told a parliamentary committee that he had unnamed “options” for doctoring the currency.

“The Government does not see itself as entirely without options in this respect, but these options have to be dealt with very carefully indeed,” he said. Dr Cullen would only say what they could be “when I’ve done something”.

No doubt it was one of those moments he would rather forget, and it has given the Opposition huge sport during the summer break.

The National Party’s John Key, a former senior currency trader, and its leader, Don Brash, have taunted Dr Cullen repeatedly as the dollar has climbed from US62c to US68c.

They will be looking to a new attack now the currency is appreciating against the Australian dollar as well as the greenback, after Reserve Bank governor Alan Bollard’s surprise decision to lift interest rates.

If all that sounds a little over-dramatic for a relatively anodyne comment to the committee, it should be put in context. Firstly, all comments by finance ministers are dissected by traders, particularly bond and currency dealers, for signals of change.

Ministers and the markets understand this symbiotic relationship; hence the fine and esteemed art of “jawboning” has evolved — trying to influence a market’s direction by talking the talk without walking the walk.

Secondly, this was obviously no mere throwaway line to the committee.

Asked what he could do about the dollar, Dr Cullen looked down at his papers. Senior Treasury official Iain Rennie looked sideways at the minister and barely perceptibly raised an eyebrow, seeming to silently ask: “How far are you going to go?” or possibly: “This could be tricky.”

There was a long pause, especially noticeable from the normally quick-fire Dr Cullen. And then he spoke.

It was that element of theatricality which set the finance reporters on alert, rather than the bare words themselves.

What has followed during summer are serious discussions between the minister and Treasury secretary John Whitehead.

Whether a written report was prepared remains to be seen. Mr Key has been refused access so far under the Official Information Act to any such advice.

But it is clear that any options are probably limited, finite and marginal in their effect.

The Reserve Bank has resisted any attempt to directly intervene in the currency market by selling Kiwi dollars, as much as Dr Cullen may be attracted to the concept.

It is likely the Treasury is offering little more.

Tinkering with the timing of bond issues and possibly the mix of overseas currency holdings seem to be the only options on the table. Small change against the flows the big international hedge funds can harness.

With that in mind, Dr Cullen’s speech to wine exporters last week appeared to signal a backdown when he said there was nothing he could do to alleviate the perception of sluggishness in the United States economy as much as he might wish otherwise.

It was no surprise that he identified the rising currency as “a weak US dollar story”.

He and others have made that point before.

What was missing, in a speech to a group with a vested interest in a lower dollar, was any reference to his now legendary “options”.

That led inevitably to interpretations that he was backing away from whatever they might have been.

The next day, speaking to the pipfruit industry, the options were back on the table.

(It is worth noting that Government insiders deny there was any change of direction in these two speeches — that they represented a flop flip, rather than a flip flop.)

Government’s role in foreign exchange, he told the pipfruit industry, was “severely restrained, although not to the extent some would have us believe”.

He went on: “So the means by which a government of a trading nation can influence the value of the currency are limited and carry with them significant risks.

“I should make the point, however, that the stance advocated by Dr Brash — a stance which renounces in advance any possibility of intervention under any circumstances — is also a risky one, although one in which a government can also wash its hands of the outcome, claiming that it was the inexorable will of the markets.

“Pragmatism suggests a careful balancing of options and risks, rather than slavish commitment to some orthodoxy.”

And then the new doctrine: “Governments need to be seen to be alert and responsible, rather than sleepily dogmatic.”

Roughly translated, that seems to mean: “I can’t really do anything, but I have to pretend to be able to, otherwise it will be trader anarchy out there.”

It’s the equivalent of the policeman with a toy gun. Everything will be fine as long as the bad guys believe it is real, but you dread the day you have to use it and watch the joke flag pop out the end.

Expect more picking at the issue when Dr Cullen appears before the select committee again next week.

But in the meantime, as the dollar rises further against the greenback and the Australian currency, we wait for Dr Cullen’s signal that he has “done something”.

And we wonder whether jawboning is not only a tried and true technique, but can also, at times, make an ass of you.

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