S'pore dollar suffers as RI cash heads home

S'pore dollar suffers as RI cash heads home

SINGAPORE (Reuters): The Singapore dollar was pressured on
Wednesday by market talk that Indonesian businessmen were
starting to wind up their "safe-haven" Singapore dollar accounts
and repatriate cash.

Analysts said this was being spurred by Indonesia's more
stable political backdrop since Abdurrahman Wahid was voted
president and initial social unrest proved short-lived.

The Singapore dollar eased to 1.6715 by 0345 GMT on Wednesday
from 1.6675 late on Tuesday and 1.6589 late on Monday.

Dealers said some wealthy Indonesians had unwound their
Singapore dollar holdings in favor of the U.S. dollar, in
preparation to send the money back to Indonesia.

The talk prompted players who were long on the Singapore
dollar to run for cover, selling the currency and buying back the
U.S. dollar.

"The Singapore dollar has weakened because we heard some
Indonesian businessmen are starting to send back money which they
deposited here in the wake of crisis," said a U.S. bank dealer.

"The amount we heard this morning is in the realm of $100-200
million," he said.

Dealers said the amounts, while not large, was enough to move
the Singapore dollar exchange rate in thin end-year trade.

Indonesian businessmen were believed to have sent billions of
dollars to safe foreign havens during the country's political and
economic crises.

A big chunk of that money is believed to be parked in
Singapore, which has long had close trade and investment ties
with Indonesia.

Any repatriation of these funds could make a significant
difference to Indonesia's efforts to recover from economic
difficulties that started in 1997.

"The prospect there started to look better. Singapore is a
safe haven, but the return around 1.00-1.50 percent a year is not
very attractive," said a dealer at a European bank.

Dealers said the economic outlook in Indonesia had improved
after the recent presidential election, which they considered
transparent.

There were also hopes that international donors would resume
lending to the crisis-hit country soon after the government
agreed to hand over a controversial audit report on the
politically charged Bank Bali scandal.

Jakarta has been under intense pressure from its international
donors to resolve the scandal which has put the country's entire
economic recovery program at risk.

But despite optimism about the improved situation in
Indonesia, some dealers pointed out that the actual fund
repatriation could prove limited in the near future.

There were still severe concerns among investors about the
country's debt overhang, which was estimated at around $160
billion.

"I suspect the actual amount of money sent back to Indonesia
might be insignificant. It's the talk of it that pressured the
Singapore dollar," said another foreign dealer.

"There is no reason to rush sending money home, really. There
are still a lot of uncertainties there. Unless there is a massive
breakthrough in debt rollover or debt restructuring, the
situation is still precarious," he said.