Treasury economists have rejected calls for the Reserve Bank to rein in the Australian dollar as ‘‘misplaced’’, saying conventional policies are equipped to handle the strong currency.

Government officials have come under growing pressure in recent weeks to follow the Swiss Central Bank and intervene in global markets to restrain the dollar, which is squeezing many exporters.

But in a blunt rebuttal from the nation’s top economic department, a new Treasury paper says trying to curb the dollar through market intervention could lead to market instability.

Instead of capping the dollar, Treasury economists Phil Garton, Danial Gaudry, and Rhett Wilcox say the Reserve Bank could cut interest rates if the currency was inflicting too much economic damage.

The paper, published today, acknowledges comments from the International Monetary Fund that the dollar – which is again trading above $US1.05 today – is overvalued.