"Ringgit 'grossly' undervalued, should be at least 4.3 to the US dollar" [BTTV]

KUALA LUMPUR: The ringgit is "grossly undervalued" and at its worst should be valued at 4.3 to the US dollar.

Economists polled by Business Times said a fair value for the ringgit is between 4.3 and 3.9 to the US dollar.

Sunway University economics professor Dr Yeah Kim Leng said the ringgit is 'grossly' undervalued and it has overshot its fundamental value.

Overshooting is a common phenomena in the exchange rate markets due to excessive demand for, or hoarding of US dollars by exporters and investors on the one hand, and opportunities for companies and investment funds to repatriate foreign funds and proceeds to leverage on the cheap ringgit, on the other hand," he said.

"Hence, it is timely to engage GLICs, GLCs, pension funds, asset management companies and exporters to reduce their anxieties over the fundamentals underpinning the ringgit as well as shore up confidence by reshoring excess foreign funds to capitalise on profitable investment opportunities in the domestic economy,"  Yeah added.

He added that since short term currency fluctuations are driven by supply and demand for the ringgit versus USD and other foreign currencies, the government could also consider incentives for early repatriation after weighing the relative costs and benefits.

"Until the US Fed cuts interest rates in the coming months, the ringgit will remain under pressure from portfolio investment outflows but shoring up investor confidence and encouraging repatriations and portfolio rebalancing of excess or underperforming foreign funds, could offset temporary bouts of currency market failure," he added.

Malaysian University of Science and Technology's professor of economics Dr Geoffrey Williams said the current exchange rate is favourable for repatriating profits.

"Now is a good time for repatriation of profits, before the ringgit strengthens again.

"If they repatriate it now, this will create demand for the ringgit and support its value," he told Business Times.

"You will not get 4.70-4.80 for long and my fair value for the ringgit would be between RM4.20 to RM4.30," he added.

The ringgit traded at 4.7750/7790 to the US dollar as at noon today.

Earlier in the day, Bank Negara Malaysia (BNM) governor Datuk Abdul Rasheed Ghaffour, in a shortly worded statement, said the ringgit is undervalued and ought to trade higher given its positive economic fundamentals and prospects.

He said BNM has stepped up engagements with government-linked investment companies (GLICs), government-linked companies (GLCs), corporations and investors to encourage continuous inflows to the foreign exchange market.

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