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.