Wires

FX COLUMN-NZ dollar to outpace a burdened Singapore dollar

-- Neal Kimberley is an FX market analyst for Reuters. Theopinions expressed are his own --

By Neal Kimberley

LONDON, Oct 9 (Reuters) - Buying New Zealand dollars andselling Singapore dollars may have merits at a timewhen major exchange rates are holding in ranges.

An important factor in the New Zealand dollar's favour isthe performance of prices for the country's main commodityexports.

ANZ Bank's commodity price index, which includes commoditiesthat account for around 60 percent of New Zealand's annualexport earnings, posted its biggest monthly gain in a year and ahalf in September, rebounding from July's 28-monthlow..

Dairy prices, an important export for New Zealand, are setto remain high and New Zealand's dairy industry may benefit morethan usual given U.S. rivals have been hit by the worst droughtin half a century.

The contrast between the economic challenges facingSingapore and the relative strength of the New Zealand economyalso favours selling Singapore's currency and buying New Zealanddollars.

New Zealand house prices rose in Septemberand its economic performance is still reasonably robust comparedwith other developed economies. Interest ratesare therefore expected to rise rather than fall from 2.5percent, according to a Reuters poll .

Of course, the picture for New Zealand is not entirely rosy,with the jobless rate at two-year highs and the governmentexpecting growth to slow in the second half of 2012.

But it is faring better than Singapore, which releases itsthird quarter gross domestic product data on Friday at 8:00 a.m.local time (0000 GMT).

Economists polled by Reuters expect Singapore's grossdomestic product shrank in the third quarter after contractingin the second.

Prime Minister Lee Hsien Loong was reported as saying onTuesday that Singapore may avoid a technicalrecession in the third quarter as second quarter data might berevised up.

Even if the city state avoids a technical recession, theMonetary Authority of Singapore (MAS), which issues a policystatement at the same time as the GDP data, could ease policy byslowing the pace at which its dollar appreciates against thecurrencies of its main trading partners.

Any such move could be the trigger for the New Zealanddollar to gain ground against the Singapore dollar.

Having traded at 1.0240 on Oct 2, the currency pair hasdrifted down to flirt with its 100-day moving average at 1.0025.

While the 2012 high of 1.0597, seen on Feb 15, might be tooambitious a target, New Zealand dollar gains to at least themid-1.02s might be attainable.

(Editing by Swaha Pattanaik; Reuters Messaging:neal.kimberley.thomsonreuters.com@reuters.net)

((neal.kimberley@thomsonreuters.com))

Keywords: MARKETS FOREX/ASIA