-- Neal Kimberley is an FX market analyst for Reuters. The
opinions expressed are his own --
By Neal Kimberley
LONDON, Oct 9 Buying New Zealand dollars and
selling Singapore dollars may have merits at a time
when major exchange rates are holding in ranges.
An important factor in the New Zealand dollar's favour is
the performance of prices for the country's main commodity
ANZ Bank's commodity price index, which includes commodities
that account for around 60 percent of New Zealand's annual
export earnings, posted its biggest monthly gain in a year and a
half in September, rebounding from July's 28-month
Dairy prices, an important export for New Zealand, are set
to remain high and New Zealand's dairy industry may benefit more
than usual given U.S. rivals have been hit by the worst drought
in half a century.
The contrast between the economic challenges facing
Singapore and the relative strength of the New Zealand economy
also favours selling Singapore's currency and buying New Zealand
New Zealand house prices rose in September
and its economic performance is still reasonably robust compared
with other developed economies. Interest rates
are therefore expected to rise rather than fall from 2.5
percent, 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 government
expecting growth to slow in the second half of 2012.
But it is faring better than Singapore, which releases its
third quarter gross domestic product data on Friday at 8:00 a.m.
local time (0000 GMT).
Economists polled by Reuters expect Singapore's gross
domestic product shrank in the third quarter after contracting
in the second.
Prime Minister Lee Hsien Loong was reported as saying on
Tuesday that Singapore may avoid a technical
recession in the third quarter as second quarter data might be
Even if the city state avoids a technical recession, the
Monetary Authority of Singapore (MAS), which issues a policy
statement at the same time as the GDP data, could ease policy by
slowing the pace at which its dollar appreciates against the
currencies of its main trading partners.
Any such move could be the trigger for the New Zealand
dollar to gain ground against the Singapore dollar.
Having traded at 1.0240 on Oct 2, the currency pair has
drifted 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 too
ambitious a target, New Zealand dollar gains to at least the
mid-1.02s might be attainable.
(Editing by Swaha Pattanaik; Reuters Messaging: