The New Zealand dollar is little changed after an attempt to push it down on the back of poor manufacturing data failed to keep it lower.

The kiwi was trading at 64.43 US cents at 5pm in Wellington, from 64.49 cents at 7:45am, after falling as low as 64.26 cents early this afternoon. The trade-weighted index was at 71.63 points from 71.72.

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The Bank of New Zealand-BusinessNZ July Performance of Manufacturing Index fell 2.9 points to 48.2, the first time manufacturing activity has contracted in seven years. New orders dried up and hiring intentions tumbled to take the index below the 50 level which denotes activity is contracting.

"Currency markets are not where the story is at the moment. It's all in equities and interest rates," says Peter Cavanaugh, the senior client advisor at Bancorp Treasury Services.


He notes US five-year Treasuries fell below 1.5 per cent overnight before better-than-expected US retail sales data was released and that the 30-year Treasury bond yield has fallen below 2 per cent in the past few days for the first time ever.

"For some time, bond markets and stock markets have been telling conflicting stories. This week, stock markets capitulated and bond markets have started yelling," Cavanaugh says.

In the US, two-year bonds are now yielding more than 10-year bonds. Should that inversion be sustained, that would be a classic indicator that a recession is likely.

"Part of the reason currencies are quiet is that every central bank wants to win the race to zero interest rates and, at the same time, have the weakest currencies," Cavanaugh says.

"The currency markets are sitting back and saying, `OK, we will do something when we find out who the winner is.'"

Last week, the Reserve Bank of New Zealand cut its official cash rate by 50 basis points to a record low of 1 per cent after cutting 25 points in May.

Bank of New Zealand chief economist Tony Alexander has described the RBNZ move as "panicked."

"They have been scared by newly falling business and consumer sentiment readings, growing turbulence offshore, and inflation which refuses to consolidate near 2 per cent," he says.


Other central banks, including the Reserve Bank of Australia and the Federal Reserve in the US, have also been cutting their official rates and, like RBNZ, are expected to cut further.

The New Zealand dollar was trading at 94.82 Australian cents from 95.09, at 53.27 British pence from 53.22, at 58.03 euro cents from 57.83, unchanged at 68.38 yen and at 4.5361 Chinese yuan from 4.5354.

Wholesale interest rate markets continue to sink in line with global rates. The New Zealand two-year swap rate edged down to a bid price of 0.9156 per cent from yesterday's close at 0.9331. The 10-year swap rate sank to 1.1750 per cent from 1.2000.