Official denies S'pore dollar, IDR link
Official denies S'pore dollar, IDR link
SINGAPORE (Dow Jones): There is no fundamental link between the levels of the Singapore dollar and the Indonesian rupiah, even though both currencies tend to move in tandem, a senior official of the Monetary Authority of Singapore said Thursday.
"We don't see any fundamental reason why that should be the case," Khor Hoe Ee, senior executive director for economics, said of the parallel movements of the two currencies.
Because of Singapore's trade and investment links with other countries in southeast Asia, "It's natural that when investors look at Singapore they also look closely at what happens in the region," he added.
But he said that fundamentally, "Indonesia is doing well," despite the recent steep decline in the Indonesian rupiah.
He said investors are starting to separate economic fundamentals from market sentiment. "Investors are much more discerning than they have been before," he said. "They will make a distinction between what happens in the financial markets and what happens in the real economy."
Observers have been surprised by the sensitivity of the Singapore dollar to movements in the rupiah, saying that the economic links between the two countries aren't particularly strong.
The two countries don't compete for the same export markets, and Singapore investment in Indonesia has been modest. Singapore investments in Indonesia in 1997 came to just US$3.1 billion, less than 10 percent of the total $36 billion of outward investment.
MAS officials declined to discuss whether the MAS had responded to a recent appeal by the Indonesian central bank for help in shoring up the level of the rupiah.
However, MAS Managing Director Koh Yong Guan tacitly acknowledged that the MAS had intervened in the foreign exchange market in recent weeks to shore up the Singapore dollar.
"It's no secret that we intervene in the market from time to time when speculation and speculative elements bring the Singapore dollar out of line," he said.