* Yen gains over 1 percent against dollar at one point
* New Zealand's central bank cuts rate to record low 3 pct
* NZ dollar initially rose as cut smaller than some expected
* Aussie, sterling, euro also fall sharply vs yen
By Kaori Kaneko
TOKYO, March 12 (Reuters) - The yen rose over 1 percent
versus the dollar on Thursday, adding to sharp gains the previous
session, while the New Zealand dollar briefly hit a two-week high
after its central bank cut rates less than some had expected.
The U.S. dollar had weakened broadly the previous day as
investors decided its recent gains had gone far enough without
new stimulus to prompt fresh buying and after a Chinese trade
report 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.
The dollar's fall against the yen accelerated after falling
below Wednesday's low near 97.00 yen.
Some traders cited yen-buying by Japanese investors, possibly
fund repatriation ahead of the end of Japan's fiscal year at the
end of March.
Others said short-term speculators saw the dollar had faced
strong resistance in the 99.50-100 yen area and were now selling
it short-term.
The greenback fell as low as 95.95 yen on trading platform
EBS, its weakest in two weeks. After trimming some losses, it was
down 0.9 percent at 96.29 yen <JPY=>.
The dollar's rally from a 13-year low in January lost steam
as it approached 100 yen last week.
The New Zealand dollar briefly touched a two-week high of
$0.5145 after the central bank limited its interest rate cut to
50 basis points.
The New Zealand dollar later fell back to $0.5134 <NZD=D4>,
down 0.2 percent on the day. []
The Reserve Bank of New Zealand said it saw the economy
hitting a trough in the middle of this year and gradually picking
up from there. []
Sterling, the Australian dollar and the euro also weakened
sharply against the Japanese currency. The euro fell 0.8 percent
to 123.75 yen <EURJPY=>.
But the euro rose 0.2 percent against the dollar to $1.2849
<EUR=> after rising more than 1 percent on Wednesday.
Analysts said with major economic zones' monetary and fiscal
policy heading in the same direction, finding lasting trends in
the currency market has become difficult as interest rate
differentials have narrowed so significantly.
"So lowering interest rates does not necessarily trigger
selling of a nation's currency," said Akira Takeuchi, manager at
Chuo Mitsui Trust and Banking.
"It's hard to predict what is driving the market, as many
players have been squeezing their risk assets to repatriate funds
to their own currencies now," he said.
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. [].
"The GDP data was a bit better than expected but it didn't
have much impact on the forex market," Kubo said.
(Additional reporting by Rika Otsuka, Masayuki Kitano and Yoko
Matsudaira; Editing by Edwina Gibbs)
