Palm oil rises to one-week top on weaker ringgit

KUALA LUMPUR: Malaysian palm oil futures rose in early trade to hit a week-high on Wednesday as the market reopened after the Eid-Al-Fitr holiday break, supported by a weaker ringgit and overnight gains in crude oil.

The ringgit, palm's currency of trade, fell to its lowest level in a month against the dollar on Wednesday morning. It was last 0.2 percent down at 4.2960 per dollar, its weakest levels since May 24.

A weaker ringgit usually supports palm oil prices by making it cheaper for holders of foreign currencies.

The benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange was up 0.9 percent to 2,463 ringgit ($573.32) a tonne at the midday break, set for its strongest gains in two weeks.

The contract briefly hit 2,464 ringgit a tonne, its highest level since June 20.

Traded volumes stood at 13,531 lots of 25 tonnes.

"The market is up on a weaker ringgit and stronger crude oil prices," said a futures trader from Kuala Lumpur, referring to the overnight jump in crude oil prices on Tuesday.

Oil prices rose by nearly 2 percent in its previous session on short covering, but dipped up to 0.4 percent on Wednesday on supply glut concerns.

Palm oil's performance is impacted by the movements of crude oil prices, as the tropical oil is used as feedstock in the making of biodiesel, a fuel substitute.

The palm oil trader however added that he expected the market to "be quiet" this week as buying activity slows during Eid, the Muslim festival that marks the end of the Ramadan fasting month.

Indonesia and Malaysia, which produce nearly 90 percent of global palm oil, are Muslim-majority countries that observe Ramadan and Eid.

In other related oils, soybean oil on the Chicago Board of Trade was down 0.1 percent, while the September soybean oil on the Dalian Commodity Exchange rose 1.3 percent.

The September palm olein contract was up 0.2 percent.