Dollar stands still amid focus on falling rates

The New Zealand dollar is little changed despite an attempt to push it down following poor manufacturing data.

The kiwi was trading at US64.43c at 5pm yesterday, from US64.49c at 7:45am, after falling as low as US64.26c early in the afternoon. The trade-weighted index was at 71.63 points from 71.72.

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.

“Currency markets are not where the story is at the moment. It’s all in equities and interest rates,” said Peter Cavanaugh, senior client adviser at Bancorp Treasury Services.

“For some time, bond markets and stock markets have been telling conflicting stories. This week, stock markets capitulated and bond markets have started yelling.” 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 said.

The NZ dollar was trading at A94.82c from A95.09c, 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 Thursday’s close at 0.9331. The 10-year swap rate sank to

1.1750 per cent from 1.2000.