I ran into an old friend in the WalMart a bit ago. He was accompanied by a probably teenage girl whom he introduced as his niece. She quickly corrected him to "granddaughter." He agreed and explained that he had momentarily been confused by the similarity between the Spanish "nieta" = "granddaughter" and the English word "niece". And interesting fact, which I didn't know it at the time, is that the English word "niece" comes from the Old French where it had the dual meaning of niece or granddaughter.
This was apparently a common pattern in Proto-Indo-European (PIE), where maternal uncle and grandfather shared a common designation and similarly nephews, nieces and grandchildren.