The New Zealand dollar gained after the US Federal Reserve left the door open for rate cuts and data showed the domestic economy grew 0.6 per cent in the first quarter.

The kiwi was trading at 65.65 US cents at 5pm in Wellington from 65.39 at 8am and 64.93 late yesterday. The trade-weighted index was at 72.03 from 71.88 at 8am.

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The kiwi got an early morning lift when the US Federal Reserve held rates but indicated that it is ready to cut in the future if necessary. It strengthened further when Stats NZ said New Zealand's economy grew 0.6 per cent in the March quarter and expanded 2.5 per cent from a year earlier. The data was in line with the median in a Bloomberg poll and higher than the 0.4 per cent forecast by the central bank.

"The first thing was the FOMC this morning. It was probably dovish enough to appease the market and give it what it was looking for. That gave risk a bit of a boost," said Mark Johnson, private client manager at OMF.

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Johnson said the domestic GDP number "was probably a bit better than what some people feared." While the two factors helped boost the New Zealand dollar, he said he expects it to be "relatively limited on the upside," in particular after the Reserve Bank of Australian governor Philip Lowe "made it pretty clear the door is certainly open to further rate cuts," in Australia. Lowe gave a speech on the "labour market and spare capacity."

The kiwi was trading at 95.26 Australian cents, from 95 cents this morning.

"It's probably a selling opportunity. These are rallies to sell into," said Johnson.

He said investor focus will now shift to the G-20 meeting as "that will really set the scene for risk." The kiwi got a lift earlier in the week after President Donald Trump confirmed he and President Xi Jinping would have an extended meeting during the event in Japan at the end of next week.

While optimism is building, Johnson said it may be too soon for a comprehensive deal, which will be disappointing for markets.

BNZ, meanwhile, lowered its New Zealand dollar forecast for the second half of the year "given the escalation of the US-China trade wars." It trimmed 1.5 to 2 US cents off its second-half projection, taking the average down to 67.50 US cents, consistent with a view that the NZD largely trades within a 65-69 cent range.

"Our projections for an NZD recovery over the second half, originally formulated late last year, were predicated on a generalised downturn in the USD alongside an easing in US-China trade tensions. We now abandon our assumption that US-China trade wars will be settled anytime soon," said senior markets strategist Jason Wong.

He also said at least one more rate cut from the kiwi central bank is likely. Another factor "hosing down our optimism" for the kiwi dollar over the second half is a view that dairy prices have likely peaked. BNZ expects a 10 per cent fall in international dairy prices through to the end of the year.

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The kiwi was at 51.77 British pence from 51.66, at 58.27 euro cents from 58.19, at 70.67 yen from 70.63, and at 4.5120 Chinese yuan from 4.5096.

The New Zealand two-year swap rate edged down to 1.2848 per cent from 1.3537 yesterday, while the 10-year swap rate eased to 1.7175 per cent from 1.7875.