Ringgit hits 10-month low against US dollar

PETALING JAYA: The ringgit continued its downward spiral yesterday in the wake of Donald Trump’s shock win in the US presidential election, depreciating as much as 1.16% to 4.2843 against US dollar, the lowest in the past 10 months.
The ringgit traded at 4.2797 to the greenback as at 5pm, Bloomberg data showed.
The Malaysian stock market, however, rebounded. The FBM KLCI rose 5.12 points or 0.31% to close at 1652.74 points.
AmResearch believes the ringgit will remain on a weaker bias in December, with full-year forecasts of 4.08-4.09 and 4.11-4.13 for 2016 and 2017, respectively.
MIDF Research is maintaining its ringgit forecast for 2016 at 4.10 to the US currency, but is projected to be stronger in 2017 in anticipation of the weakening of the dollar due to heightened uncertainties over Trump’s policies.
While the market is expected to undergo a period of volatility, Hong Leong Investment Bank (HLIB) Research said, global liquidity remains abundant with ongoing quantitative easing by the European Central Bank and the Bank of Japan, providing a buffer to cushion the downside impact of any severe correction.
Analysts believe the Trump win will likely see the US Federal Reserve put off an expected December interest rate increase, which will be a definite positive for the ringgit as funds will be flowing back to emerging markets.

It also expects Bank Negara Malaysia to continue its accommodative and supportive monetary policy in the near future and a possible rate cut is expected should the after-effect of the US presidential election result be larger than expected.
AmResearch sees the Overnight Policy Rate (OPR) staying unchanged at 3.00% in 2016, but maintains its view of a 40% probability for a 25 basis-point rate cut in the Nov 23 Monetary Policy Committee meeting.
Commenting on trade between Malaysia and the US, MIDF Research said Malaysia’s exports to the US are still significant despite not being as dominant as it was before.
As of September, Malaysia’s exports to the US amounted to RM59.4 billion or 10.4% of total exports, a 11.5% growth compared with a year earlier. This makes the US the third biggest export destination for Malaysia after Singapore and China.
MIDF Research pointed out that within the Top 10 export destinations, the US is the only market that has grown consistently by double digits in the past three years.
Currently, electrical and electronics constitute close to 60% of Malaysia’s total exports to the US. Hence, it expects an increase in trade protectionism, via tariff and non-tariff measures, to dampen export growth to the US in the middle to long term.
MIDF Research expects the US-Malaysia relationship to remain strong with no drastic changes in the short term. However, possible changes could take place in US foreign policies should Trump push forward his election manifestos, particularly on the fight against terrorism, stance on nuclear power and balancing China’s influence in the region.
HLIB Research noted that stocks in the export sector may be affected by adverse sentiment from anti-trade policies, with the technology sector seen to be more vulnerable to any trade policy change to help boost US jobs, compared with other resource-based export sectors.
AmResearch expects Malaysia to achieve gross domestic product growth of 4% and 4.5% for 2016 and 2017, respectively, which will be supported by domestic activities and pragmatic policies with exports continuing to complement economic growth.