Banks in Singapore are to stop setting a reference rate for the Indonesian rupiah, the local banking and foreign exchange associations said on Tuesday, eight months after 20 banks were censured for trying to rig benchmark rates in the city-state.

Singapore's foreign exchange market came under pressure last year after the central bank found 133 traders had tried to manipulate borrowing and currency rates, some of which were used to price derivatives linked to other Southeast Asian currencies.

The move came against a backdrop of a global crackdown on rate-rigging, that started with the Libor scandal in 2010, and has since spread to the foreign exchange and commodity markets.

The attempted manipulation in Singapore attracted the attention of neighbouring central banks, who for years, have held concerns about the impact of offshore speculation on their own currency markets.

Banks in the city-state stopped setting a reference rate for the Malaysian ringgit last year and rely now on one set by banks in Malaysia instead, but continued to set one for the rupiah as there was concern about the reliability of the onshore rate.

The Singapore Foreign Exchange Market Committee (SFEMC) now recommends that banks instead use the IDR JISDOR (Jakarta Interbank Spot Dollar Rate), which is published by Indonesia's central bank.

"This change reflects the industry's guiding principle that where a suitable alternative benchmark exists, it should be used," the Association of Banks in Singapore said in a statement.

The rupiah reference rate is mainly used to price derivatives known as non-deliverable forwards, which are used by companies and investors seeking to hedge currency risk in countries where capital controls restrict foreign money flows.

The average daily volume in the rupiah NDF market was estimated by HSBC to be between $500 million and $700 million in 2012.

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