* 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.
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, 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.
But the euro rose 0.2 percent against the dollar to $1.2849 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)