Ringgit wins if Clinton wins, says AmBank Research

PETALING JAYA: The ringgit is expected to strengthen to 4.15 against the US dollar if Hillary Clinton wins the 2016 US presidential election, while the Malaysian currency is expected to weaken to 4.50 against the greenback if Donald Trump is victorious, says AmBank Research.
In the wee hours of polling day in the US, the ringgit was weaker by 0.23% to 4.203 against the dollar as at 5pm Malaysian time yesterday, Bloomberg data showed.
The research house said should Clinton win the presidential election, risk-on sentiment could see the US dollar strengthen against safe haven currencies like the yen, Swiss franc and euro. A Clinton victory will mean less policy uncertainty compared with a Trump win.  
It added that a Clinton triumph could see Asia ex-Japan currencies strengthen against the US dollar in the short term given the better sentiment and improved stability that could drive capital flows back to emerging markets.  
“Benefiting from the capital inflows into local markets, we expect the ringgit to strengthen to test the 4.15 level against the US dollar (currently 4.21),” said AmBank.
It added that if Clinton wins, it will maintain its end-2017 target of 1,745 points for the FBM KLCI.
“We reiterate our view that a win by Clinton, while very much the market’s ‘base case’, would still trigger a relief rally in the markets with the removal of the ‘Trump presidential risk premium’ from the equation.”
However, it does not rule out the possibility that a Clinton victory could spark uncertainties too.
AmBank said should Trump win the White House, surging risk aversion could see the US dollar weaken against safe-haven currencies.
Bond markets in developed economies are expected to rally while global equities are expected to decline given the flight to safety flows in response to a Trump victory.
Given the strong trade relations between China and the rest of Asia, the research hose expects most Asia ex- Japan currencies to weaken against the US dollar. Risk aversion could worsen the situation as it will result in more capital outflows.
“We expect the ringgit to weaken against the US dollar if Trump is announced to be the next US president and could see the ringgit test a low of 4.50 (current 4.21) against the US dollar,” AmBank said.
If Trump wins, AmBank will cut its end-2017 target for the FBM KLCI to 1,645 points.
“A win by Trump will trigger a major selloff. We believe that could last for days, weeks or months as the market tries to get a better grasp of what is in store for the US and global economies under the more radical tax, foreign relations, international trade, immigration, healthcare and fiscal policies proposed by the Trump administration," said AmBank.