Hard, inflexible materials tend to make fairly terrible swords, axes, armor, etc. There is a reason nobody used rock armor or cast iron swords.
A lot of cutlery and stuff does get made from various nickel steels, but that is because they don't cut anything very hard and are all fairly small.
Damascus knives (by the modern definition of Damascus steel that is) have nickel steel in them because its very resistant to corrosion, and etching acids by extension. They layer it in with some carbon steel, fold and warp it about, forge it into a knife and then dip it in etching acid. The nickel steel stays light and shiny while the carbon steel turns darker and you get some really fancy patterns.
It is however done just for aesthetics, and purely a modern thing. Historically pattern-welding was done with just various qualities of wrought iron and steel and if there was any good quality steel available they would use that in pure form for the edge, welding it onto a pattern-welded body.
Though then again, DF has no concept of wear and breakage of weapons and armor and while the values in the raws generally correspond to reality, the emergent game behaviours often... doesn't.
There is also some modern steels that use nickel with... chromium or cobalt, not sure which. They are used for jet engine blades, so it should be fairly solid stuff. Its way, way beyond DF's tech level though.