Palm oil lifted by external markets, but ringgit gain caps rise

KUALA LUMPUR: Malaysian palm oil futures were trading higher in mid-session Wednesday tracking overseas markets, but a strengthening ringgit kept gains in check.

The benchmark palm oil February contract on the Bursa Malaysia Derivatives Exchange was up 0.3 percent at 2,630 ringgit ($638.19) a tonne during the midday break.

Traded volume stood at 17,150 lots of 25 tonnes each.

"Strength in competing oils is providing support to palm but continuous appreciation in the local currency could hamper the uptrend," a Kuala Lumpur-based futures trader said.

The most-active soybean oil contract on the Chicago Board of Trade was up 0.1 percent, while Dalian Commodity Exchange soybean oil rose 0.4 percent. Dalian palm olein climbed 0.3 percent.

Movements of rival vegetable oils impact palm as they compete for a share in the global market.

"Stronger overseas market supported palm early today but the ringgit rally is capping the upside," said another trader from Kuala Lumpur.

News about India's decision to raise import tax on crude palm oil to 30 percent from 15 percent has been factored in, and market is now reacting to the ringgit movement, the trader added.

The ringgit has risen to 13-month highs following positive domestic economic growth data. The currency was up 0.41 percent to 4.1210 against the dollar at midday. A stronger ringgit makes palm less attractive to buyers holding other currencies.

Earlier this week, the palm futures took a hit after India's announcement, suffering the largest one-day loss in eight months on Monday, and sliding to its weakest since Aug. 16 on Tuesday.

On technicals, the palm oil third-month contract seemed to have stabilised around a support at 2,606 ringgit per tonne, Wang Tao, a Reuters commodities and energy market analyst said.

"It may hover around this level or bounce towards a resistance at 2,661 ringgit," he added.