WELLINGTON (Dow Jones)--The New Zealand dollar was down late Monday, but traders say the local currency remains on track for further gains after scaling near 13-month highs in Friday's offshore session. Traders say some profit-taking and a broad-based recovery of the U.S. dollar in early Asian trade dented risk currencies, including the Kiwi, the Australian dollar and the euro. Mounting trade tensions between China and the U.S. caused risk-averse investors to seek refuge in the safe-haven U.S. dollar in afternoon trade. Sue Trinh, currency strategist at RBC Capital Markets, said traders started reacting to news out on the weekend that Beijing has singled out U.S. automotive and poultry products imports for a probe after Washington decided to impose steep import duties on Chinese tires. "Clearly, that sort of response suggests the market fears the trade war is going to blow out into an all out global war, but that seems misguided, and that the U.S. rally appears to have dissipated for now," Trinh said. The Kiwi fell nearly one U.S. cent, sliding to US$0.6971 from US$0.7061 before recouping part of those losses in late afternoon trade. Trinh expects the recent strong momentum to invest in risk assets, broadly stronger stocks and commodities, and improving global data to help push the Kiwi towards US$0.7200 in coming sessions. The local currency rose to US$0.7089 in Friday's London session - the highest point since Aug. 25, 2008. Westpac bank senior markets strategist Imre Speizer said a sustained break above US$0.6900 last week signals further gains for the Kiwi. Speizer is pegging support in the US$.6900-US$0.6950 range, and minor resistance around US$0.7200. However, "serious technical obstacles" aren't present until US$0.7400, he said. Data released during the session had little impact on the currency and debt markets. They showed the housing sector continued to tick up in August, while the July retail sales report displayed unexpected weakness. Government bonds were range-bound with a modest upward bias in the long-end, and swaps traded slightly lower with receiving dominating the two-year part of the curve. ANZ bank said in a report that receivers will start to exert their influence as the swap market eventually buys into the Reserve Bank of New Zealand's message to keep rates low for a prolonged period. "With the RBNZ committed to low or lower rates until late 2010, we see value in receiving the two-year swap above 4% and benefiting from the positive carry," the bank said. The two-year closed down 1.5 basis points at 3.955%.

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