NZ dollar falls on buoyant USD; bonds firm

* Kiwi dips slightly, seen driven by market sentiment

* Q1 manufacturing sales point to sharp GDP fall

WELLINGTON, June 15 - The New Zealand dollar <NZD=> eased over half a cent on Monday against a broadly firmer U.S. dollar and after domestic data showed the economy was likely to have contracted sharply again in the first quarter.

The kiwi's losses were limited by the central bank's decision last week to leave interest rates on hold, though with that now out the way the market is expected to track global trends in the week ahead.

"Looking ahead, with little on the local data calendar, U.S. dollar sentiment will hold the key to the near-term fortunes of the NZ dollar," BNZ currency strategist Danica Hampton said in a note to clients.

The New Zealand dollar was at $0.6373/80 at 0500 GMT, compared with $0.6434/38 in late local trade on Friday. The kiwi held a very tight local range of $0.6373-$0.6397.

Manufacturing sales volumes nudged up in the first quarter, the first rise in more than a year, but still pointed to a sharp fall in March quarter GDP, due next week. [ID:nWEL419322]

Another survey showed activity in the services sector improved in May, although it remained in contraction. [ID:nWEL448119].

Last week the kiwi jumped as much as 3.2 percent after the Reserve Bank of New Zealand held its cash rate at a record low 2.5 percent on Thursday, ending a run of cuts that had taken the benchmark rate to a record low. [ID:nWEL502629]

Many analysts believe the RBNZ has now ended its year-long easing cycle, despite it saying further cuts were possible.

The U.S. dollar regained some of the ground it lost last week, as profit-taking hit other major currencies, which had gained on expectations of a global economic recovery.

Swap rates firmed slightly, with two-year swaps <NZDSM3NB2Y=> at 3.87 percent and five-year swaps <NZDSM3NB5Y=> at 5.36 percent.

New Zealand bonds gained, tracking a firmer tone in Treasuries, with the yield on the benchmark NZ 10-year bond <NZ10YT=RR> down 3 basis points to 5.98 percent.