Urgings for a more robust ringgit hedge for exporters have emerged as the local note breached the psychological level of 4.0 against the US dollar today.
Corporate dealers at local banks have started urging Malaysian exporters to consider hedging the current level of the ringgit, which is said to be the best level for exports, against the greenback.
Malaysian exporters who obtain their revenue in US dollars have enjoyed good profits due to the strengthening greenback, but as the ringgit’s depreciation could be temporary, hedging it to maintain the best level of exports is recommended, said a dealer who wished to remain anonymous.
“Anything above 4.0 is attractive, so lock it.
“Exporters can choose products such as currency forwards and options typically sold by banks to hedge the moving exchange rates, rather than hoping the spot foreign exchange to be always in their favour,” she told Bernama.
The ringgit continued its fall at 5pm, breaching the 4.0 level per dollar for the first time since the Asian financial crisis 17 years ago.
It was quoted 1.96 percent lower at 4.0375/0415 against the greenback from 3.9600/9630 at 5 pm yesterday.
On Jan 7, 1998 the local currency collapsed to an all-time low of 4.88 in a single-day event, triggered by currency speculators during the crisis, prompting the government to take drastic action to peg it at 3.80 to the dollar for almost seven years, while remaining floated against other currencies.
Currency market traders have attributed the current volatility and depreciation of the ringgit against the US dollar to concerns over global crude oil oversupply, with each slide of the benchmark West Texas Intermediate (WTI) and Brent crude boosting selling momentum in currencies of emerging economies linked to crude oil exports.
The ringgit also faces other challenges - falling government bond prices, issues confronting state sovereign fund 1MDB, and most recently, the devaluation of China’s yuan, said a senior trader.