The New Zealand dollar was trading slightly higher late Thursday, helped by investors buying the currency cheaply after it dipped on weaker-than-expected gross domestic product data. The New Zealand dollar fell to US$0.7398 after Statistics New Zealand said that real, seasonally adjusted production-based gross domestic product contracted 0.2% in the three months ended Sept. 30 compared with the same period a year earlier. GDP expanded a revised 0.1% in the second quarter. Economists had expected third-quarter GDP to expand 0.1%.

Goldman Sachs economist Philip Borkin said the weak result will cement the Reserve Bank of New Zealand to the sidelines for much of next year, and that the central bank won't likely resume monetary tightening until the third quarter of 2011. In early December, the Reserve Bank held the Official Cash Rate at 3.00% and said it seemed prudent to keep the policy rate low until the recovery becomes more robust and underlying inflationary pressures showed more obvious signs of increasing.

However, the New Zealand dollar swiftly pared its losses, as investors took advantage of the dip following the GDP data, said ANZ foreign exchange manager Murray Hindley. "It's an opportunity for exporters to cover (their short positions) going into the Christmas break," he said.

Looking ahead, Mike Jones, currency strategist at BNZ said U.S. data will occupy the limelight later in the global trading day with the focus on durable goods orders, new home sales, personal spending and the University of Michigan consumer confidence survey. "Further signs of strengthening economic momentum could provide impetus for the U.S. dollar," Jones said. Domestic government bonds ended slightly higher Thursday, while swap rates eased somewhat, largely on the back of the weaker-than-expected GDP result, a local bond trader said.