Question

What policy remedies, if any, are available to countries with overly strong currencies?

Answer 1

Here are the following measures can be taken by the country with stron currency:

1) The country with strong currency buy other country assets which will result in higher demand of currency of other countries which will result in decline in value of your currency.

2) Devaluation under fixed rate regime: Under this the country officially cuts the value of their currency resulting in decline in currency value.

3) Lowering interest rates: This might reduce demand of strong currency as it will earn lower interest now, so the investments will shift to other high interest earning currencies , so this will help reducing value of strong currency.

the above is the answer