Hedge ringgit above 4.2 against US dollar, exporters urged

Malaysian exporters should consider hedging the ringgit aggressively when the local note surpasses 4.20 against the US dollar, says the RHB Banking Group.

Its Chief Economist Lim Chee Sing said exporters should sell the US dollar proceeds forward as the local note might strengthen to 3.80 per US dollar in 2017.

"Besides other weakening fundamental factors, the ringgit is actually undervalued because there is currently a significant political and investment risk premium being built into it.

"The fear of political instability is overblown. The political risk premium accorded to the ringgit should narrow over time.

"When the political landscape becomes clearer, the headwinds should dissipate, the risk premium would narrow, and the ringgit will strengthen back towards the 3.80 level versus the dollar, perhaps towards end-2017," he told a press conference at the TaxMax 42nd Series Seminar organised by Deloitte Malaysia here today.

TaxMax is an annual seminar targeted at top-level management teams, finance professionals and interested individuals who wish to leverage tax planning opportunities from Budget 2017.

Themed "Brave decisions, Brave Actions", the full-day seminar expanded on tips on how to take the lead, make decisions to the best of our abilities and embark on that ultimate step to overcome the current economic uncertainties.

Lim, who is also RHB Research Institute Chairman, said the US election would also have a significant impact on the US dollar and subsequently on the ringgit.

"If Hillary Clinton gets elected, a continuation of (current President) Barack Obama's policies can be expected. It does remove certain uncertainties and the greenback will continue to trade sideways in that scenario.

"If Donald Trump gets elected, being very US-centric, his uncertain policies would create a lot of concern for people outside the US, but people will still go for the dollar, it being a safe-haven currency. The greenback would strengthen rather than weaken," he added. -- BERNAMA