KUALA LUMPUR: Malaysian palm oil futures fell over 4 percent on Monday to post their biggest intraday drop in over four months, retreating from a four-year high in the previous session as they tracked weaker-performing rival oils on China's Dalian Commodity Exchange.
Benchmark palm oil futures for January on the Bursa Malaysia Derivatives Exchange were down 4.1 percent at 2,852 ringgit ($659) a tonne at the close of trade, their biggest intraday decline since July 8.
Traded volumes stood at 56,634 lots of 25 tonnes each at the end of the trading day, above the 2015 daily average of 44,600 lots.
"The market is undergoing a correction and China's Dalian is down quite a bit," said a trader from Kuala Lumpur, adding he expected palm prices to stabilize between 2,700-2,800 ringgit.
Palm prices are impacted by related oils on Dalian, as they compete for a share in the global vegetable oils market.
The January soybean oil contract on China's Dalian Commodity Exchange fell 4.3 percent, while the January contract for palm olein on the same exchange declined 5 percent.
Palm oil is also affected by the ringgit, its currency of trade. Palm hit its highest since September 2012 in a previous trading session, lifted by the ringgit, which dropped 3.5 percent from its previous close in offshore forwards markets on Friday.
A weaker ringgit generally makes palm oil cheaper for holders of foreign currencies. It weakened 1.1 percent to 4.3250 per dollar on Monday.
In other related oils, the December soybean oil contract on the Chicago Board of Trade was down as much as 1.4 percent.
Palm oil is expected to test a support at 2,879 ringgit per tonne, a break below which could cause a loss to the next support at 2,814 ringgit, according to Reuters market analyst for commodities and energy technicals Wang Tao.
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