March 12, 2009 / 1:44 AM / 10 years ago

FOREX-Yen strengthens, NZ dollar gains after rate cut

* Yen strengthens vs dollar, extending previous day’s gains

* Japan Q4 GDP revised up slightly to 3.2 pct contraction

* New Zealand’s central bank cuts rate to record low 3 pct

* NZ dollar gains as cut smaller than some expected

By Kaori Kaneko

TOKYO, March 12 (Reuters) - The yen rose against the dollar on Thursday, extending the previous session’s sharp gains, while the New Zealand dollar climbed after its central bank cut interest rates less than some expected but still to a record low.

The Reserve Bank of New Zealand said it saw the economy troughing in the middle of this year and gradually picking up from there. [ID:nSYD214234]

The New Zealand dollar rose more than half a cent to $0.5134 NZD= after the decision, which took the benchmark rate down by half a percentage point to 3.0 percent. [ID:nWEL435757].

The U.S. dollar had weakened broadly on Wednesday as investors decided its recent gains had gone far enough without any new stimulus to prompt fresh buying and after a Chinese trade report that cast doubt on China’s ability to finance the U.S. current account deficit.

“There’s been a pause in the dollar’s rise and in that situation the yen has been bought,” said Nobuaki Kubo, vice president of BBH Investment Services.

Data released on Thursday showed Japan’s economy shrank 3.2 percent in the final three months of last year, revised from an initial drop of 3.3 percent but still the sharpest contraction since the oil crisis in 1974. [ID:nT7510].

The yen edged up after the data was released, although traders said the market’s view on the economy was unchanged.

“The GDP data was a bit better than expected but it didn’t have much impact on the forex market,” Kubo said.

The dollar fell 0.5 percent to 96.81 yen JPY= after dropping 1.5 percent on Wednesday. Its rally from a 13-year low in January lost steam as it approached 100 yen last week.

One trader said its drop through 97.00 on Thursday triggered further sell orders.

“There were no obvious factors for the dollar’s fall the previous day and the currency’s move keeps it at the lower end of ranges,” said Yuichiro Nakamura, a forex dealer at Shinkin Central Bank.

The euro rose 0.18 percent to $1.2858 EUR= after gaining 1.4 percent on Wednesday and touching a two-week high of $1.2865 on trading platform EBS. (Editing by Michael Watson)

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