The kiwi dollar climbed as high as $0.7469 from $0.7408 late in New York on Wednesday after figures showed the economy grew slightly above expectations at 0.2 percent in the December quarter.

"That small surprise has sparked a relief rally of more than half a cent in the kiwi," Mike Jones, strategist at Bank of New Zealand said.

"It's some comfort for market participants that the economy was in reasonable shape before the earthquake hit," Jones said, adding the market had become overly bearish on the kiwi, with growing expectations of a negative number.

The positive mood was reinforced by Finance Minister Bill English who said there were reasons to be optimistic about the outlook for the economy in the second half of 2011 with high commodity prices, low interest rates and inflation, earthquake reconstruction and the rugby World Cup

Growth prospects in the short-term, however, are limited in the wake of the devastating Christchurch earthquake last month with analysts forecasting flat to negative growth early 2011, before picking up towards the end of 2011 as rebuilding gathers momentum.

The kiwi was last at $0.7449, having failed to sustain a break of the $0.7450 resistance level. Support is seen from $0.7360.

The Aussie slipped against the kiwi to a one-week low around NZ$1.3555. Yet, it remained not far off a 19-year peak near NZ$1.38 set earlier in the month, reflecting the nations' diverging economic outlooks.

The New Zealand central bank slashed interest rates by 50 basis points to 2.5 percent last month, while the Reserve Bank of Australia has led developed countries with a total of 175 bps in tightening since 2009.

The Aussie held firm at around $1.0130, underpinned by strong commodity prices , particularly copper prices which climbed by more than 2 pct .

Upbeat Chinese data also helped. HSBC flash manufacturing purchasing managers' index (PMI) rose to a two-month high of 52.5 in March, up from a final reading of 51.7 in February

The local currency is very sensitive to any economic news from China, its key export market.

Also helping the Australian dollar was a large cross-border merger and acquisition flow. Traders reported some A$3.5 billion were pushed through the market by a UK bank following a complex deal between Australia's wealth manager AMP Group and AXA .

Traders, though, warned the Aussie could be facing major resistance at $1.0200, so progress is likely to be slowed by profit taking.

Still, the Aussie has made a stunning turnaround from last week when it plunged to four-month lows around $0.9705. It has gained 3.6 percent in the past week.

The Antipodean currencies made further advances on a generally weaker euro, which fell after Portuguese prime minister resigned following the rejection by parliament of his latest austerity measures aimed at avoiding a bailout.

The euro shed more than 2.5 percent on the Aussie and kiwi so far this week.

In Japan, the threat of further intervention to rein in the yen should underpin commodity currencies because it would encourage investors to use the yen as a funding currency for carry trades.

So far, the Aussie and kiwi have been holding onto gains against the Japanese currency at 81.99 yen and 59.65 yen respectively, well off last week's lows around 75.00 yen for the Aussie and 54.98 yen for the kiwi.

New Zealand government bond yields were flat while interest rate futures were down by as much as 3 points as markets reaffirm expectations of a small rate rise later this year or early next year.

The New Zealand's Debt Management Office's weekly bond tender was increased to NZ$950 million, the highest in two months following strong market demand. The auction was one-and-a-half times bid.

Australian bond futures gained with the three-year contract up 0.03 points at 95.020, and 10-year contract up 0.025 points at 94.580.