Palm climbs to 5-week high after ringgit weakens to 4-month low

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KUALA LUMPUR (Sept 18): Malaysian palm oil futures rose to their highest in over five weeks on Thursday as the Malaysian currency slipped to its lowest since early May and stoked buying interest, although some profit-taking in late trade eroded gains.

The Malaysian ringgit fell to a four-month low ahead of the central bank's monetary policy decision, weakening 0.8 percent to 3.2425 against the greenback, and making palm oil cheaper for overseas buyers and refiners.

Bank Negara Malaysia said late Thursday it will keep the country's key interest rate unchanged at 3.25 percent.

However, mild profit-taking in afternoon trade eroded some of the gains, traders said. But hopes that the weaker currency will stoke demand for the ringgit-priced feedstock prevented steeper losses.

Most Asian currencies have fallen this month on worries that the U.S. Federal Reserve will take a more hawkish stance and raise interest rates faster that earlier anticipated.

"Near term, the U.S. may raise interest rates, and this will be a bonus for the U.S. dollar," said a trader with a foreign commodities brokerage in Kuala Lumpur.

"At the same time, the Malaysian central bank might maintain the overnight policy rate. This will weaken the ringgit, which is positive for palm oil," the trader added.     

The benchmark December contract on the Bursa Malaysia Derivatives Exchange closed 0.1 percent higher at 2,145 ringgit ($664) per tonne. Prices earlier rose to 2,173 ringgit the highest level since Aug. 13.

Total traded volume stood at 74,838 lots of 25 tonnes, more than double the usual 35,000 lots.            

Technicals showed that palm oil is expected to climb to 2,213 ringgit per tonne as it has broken resistance at 2,142 ringgit, said Reuters market analyst Wang Tao.  

Expectations that the robust export demand seen in the first half of September will hold into next month also provided support to palm, traders said.

Exports of Malaysian palm between Sept. 1 and Sept. 15 jumped about 180,000 tonnes compared with a month ago, with demand for crude palm oil surging.        

The tropical oil has pulled up more than 200 ringgit after plunging to a five-and-a-half-year low of 1,914 ringgit on Sept. 2, and is now on track for its biggest monthly gain since October 2013 with an 11 percent rise so far in September.

But gains in palm oil will also narrow its discount to competing vegetable oils and potentially water down food and fuel demand from key buyers such as China and India.    

"The question is how much the market can pull up. It is trying to hold and push higher, but there is strong resistance at 2,200 ringgit for the benchmark December contract," the Kuala Lumpur-based trader added.

In rival vegetable oil markets, the U.S. soyoil contract for December edged down 0.4 percent in late Asian trade, while the most active January soybean oil contract on the Dalian Commodities Exchange rose 0.1 percent.

In other markets, oil traded lower below $99 a barrel on Thursday, pressured by ample supply and concern over the weakening of demand growth in major consumer nations, as well as a rise in the U.S. dollar.   

Palm, soy and crude oil prices at 1027 GMT

Contract        Month    Last   Change     Low    High  Volume
MY PALM OIL      OCT4    2170   +14.00    2160    2189    1159
MY PALM OIL      NOV4    2143    +8.00    2133    2166   14320
MY PALM OIL      DEC4    2141    -3.00    2136    2173   33390
CHINA PALM OLEIN JAN5    5278   +46.00    5250    5288  654990
CHINA SOYOIL     JAN5    6060    +4.00    6054    6112  416232
CBOT SOY OIL     DEC4   33.41    +0.00   33.35   33.75    6656
INDIA PALM OIL   SEP4  463.90    +0.00  461.40  467.90    1308
INDIA SOYOIL     SEP4  643.60    -1.35  643.60  646.00    1690
NYMEX CRUDE      OCT4   94.23    -0.19   93.62   94.45   14150

Palm oil prices in Malaysian ringgit per tonne
CBOT soy oil in U.S. cents per pound
Dalian soy oil and RBD palm olein in Chinese yuan per tonne
India soy oil in Indian rupee per 10 kg
Crude in U.S. dollars per barrel

($1 = 3.23 Malaysian ringgit)
($1 = 6.1406 Chinese yuan)
($1 = 60.92 Indian rupees)