NZ dollar barely budges as all eyes focus on North Korea

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The New Zealand dollar barely budged from where it started the day after a brief lift following strong retail sales was short-lived as attention remained focused on events surrounding North Korea.

The kiwi rose as high as 73.31 after the retail sales and was trading at 73.07 US cents as at 5pm in Wellington from 73.09 cents as at 8am and from 73.18 cents in New York on Friday. The trade-weighted index rose to 76.93 from 76.82 last week.

Government figures today showed the volume of retail sales rose 2 per cent in the June quarter, underpinned by increased spending during the World Master's Games and the British & Irish Lions rugby tour.

"It jumped on retail sales numbers but when you looked at the detail, it was the Lions tour," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank. "Otherwise, it has been a reasonably quiet day in Asia."

Looking ahead, Kelleher said the market is watching for further developments over tensions on the Korean peninsula, although some risk appetite has returned with the Dow futures pointing to a positive day. The greenback benefited, bouncing slightly against the yen despite Japan's gross domestic product data being stronger than expected. The greenback was at around 109.07 yen per US dollar before the data and was recently at 109.50 yen.

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Late Sunday, US Secretary of Defense Jim Mattis and Secretary of State Rex Tillerson wrote that the Trump administration was continuing to seek diplomatic solutions to seek the "irreversible denuclearisation" of North Korea. "The US has no interest in regime change or accelerated reunification of Korea," the two wrote in a commentary published in The Wall Street Journal. The US also has no desire to station troops north of the Demilitarized Zone, they added.

"We are waiting for headlines," said Kelleher.

Closer to home, Kelleher said investors will be watching for results from the GlobalDairyTrade Auction tomorrow night. Nigel Brunel, director of financial markets at OMF, said whole milk powder and skim milk powder are holding premiums over the last GDT auction "suggesting a small rise in the index led by whole milk powder."

The kiwi slipped to 4.8682 yuan from 4.8747 yuan on Friday in the US, declined to 61.81 euro cents from 61.91 cents and decreased to 56.15 British pence from 56.24 pence. The kiwi was at 92.53 Australian cents from 92.67 cents. Both the kiwi and the Australian dollar may also have been weighed down by data showing China's industrial production and retail sales slowed in July.

New Zealand's two-year swap rate was unchanged at 2.14 per cent while 10-year swaps rose 1 basis points to 3.12 per cent.