The benchmark palm oil contract for July delivery on the Bursa Malaysia Derivatives Exchange dropped 2.1 percent to 2,476 ringgit ($565.62) a tonne at the midday break, its sharpest drop since April 17.

Traded volumes stood at 20,080 lots of 25 tonnes each at noon.

The market was closed for a public holiday on Monday.

Weaker rival oils also weighed on sentiment, as prices tracked the performance of related edible oils as they compete for a share in the global vegetable oils market.

"The market is down on ringgit strength and weakness in external commodities," said a futures trader based in Kuala Lumpur.

Concerns over an output glut also hit sentiment, another trader said.

The ringgit, the currency in which palm oil is traded, strengthened against the dollar on Tuesday, and was last up 0.5 percent at 4.3770 per dollar. A stronger ringgit makes palm oil more expensive for holders of foreign currencies.

Cargo surveyor data also showed weaker exports during April 1-25, despite the upcoming season of Ramadan, a holy month of day-long fasting and feasting for Muslims across the world that begins end-May and which spurs higher palm oil demand for cooking.

Intertek Testing Services said on Tuesday that shipments from Malaysia fell 3.4 percent from the corresponding period of the previous month.

Palm oil faces a resistance at 2,542 ringgit, according to Wang Tao, a Reuters market analyst for commodities and energy technicals.

In related vegetable oils, soybean oil on the Chicago Board of Trade slipped as much as 1.2 percent, while the September soybean oil contract on the Dalian Commodity Exchange fell 0.8 percent.

The September contract for palm olein dropped 2.2 percent.