NZ dollar steady amid risk caution, bonds weaker

* NZ dollar steady ahead of data, Fed

* Rising migration to underpin recovery

* Bonds weaker

WELLINGTON, Sept 21 - The New Zealand dollar <NZD=> held steady in thin trading on Monday, with investors cautious after recent sharp gains and ahead of a flurry of local data and a Federal Reserve meeting this week.

The kiwi settled around $0.7071/81 at 0500 GMT, just below late Friday's levels, as the U.S dollar recovers from one-year lows against the euro <EUR=>.

"The upside momentum in the New Zealand dollar slowed considerably during the last three days," said Westpac senior market strategist Imre Speizer.

He said there was no certainty yet whether this could be the signal for a "much larger correction".

The kiwi has risen more than 40 percent since hitting a six-year low in early March on hopes of a global economic recovery that will benefit New Zealand.

In the broader markets, the U.S dollar gained as traders covered short positions and looked to the Federal Reserve's two-day policy meeting and Group of 20 summit this week.

The Federal Open Market Committee (FOMC) is expected to hold rates steady but markets will be interested for any guidance on when the super-accommodative policy stance will be wound back, given a recent pickup in economic data.

There is also focus on the G20 meeting, which begins on Thursday, for possible comment on the ailing U.S. dollar.

Locally, the markets are awaiting second-quarter current account data on Tuesday and gross domestic product on Wednesday, with a Reuters poll forecasting a balance of payments deficit of 7.2 percent of GDP, and the economy to have contracted 0.2 percent from the first quarter. For more, see [ID:nWEL412405]

That would probably be the last quarter of economic contraction for New Zealand, which has been in recession since the start of last year. [NZ/POLL]

New Zealand bond prices were weaker, with the yield on the benchmark 10-year bond <NZ10YT=RR> 2 basis points higher at 5.65 percent.