Malaysian palm oil futures hit three-week lows on Tuesday, tailing losses in global commodity markets, as dollar surged after two Koreas exchange fire in a disputed maritime border. Dollar rose on Tuesday after North Korea shelled a South Korean island, adding geopolitical tension to Europe's debt crisis and driving investors to the relative safety of the US currency.
Commodity markets were already under pressure from the firming greenback on anxiety about eurozone debt, but the attack, lifted the dollar by half a percent and US 10-year Treasury futures up 20/32. Crude oil fell towards $81 in Asian hours, while US soyaoil for December delivery fell 0.7 percent.
The benchmark February 2011 crude palm oil contract on Bursa Malaysia Derivatives lost 2.2 percent to settle at 3,115 ringgit ($1,005) a tonne, after going as low as 3,103 ringgit - a level unseen since November 3. Overall traded volume almost tripled to 26,496 lots of 25 tonnes each.
"What happened in Korea has dragged many Asian equity markets down, eventually pulling Malaysia's palm oil prices lower," said a trader with foreign brokerage in Kuala Lumpur. Malaysia palm oil market is weighed further on China's pledge to step up controls on money supply and credit last week. A Reuters technical analysis showed Malaysian palm oil is likely to fall towards 3,079 ringgit per tonne.
The most active September 2011 soyaoil contract on China's Dalian Commodity Exchange dropped 1.8 percent in Asian hours, as concerns over Beijing's inflation-cooling measures continued to shadow. "Firmer US dollar and conflict in Koreas do little to impact China's soyaoil market. Chinese government's plan to cap food inflation still the major reason that drove market downward," said Zhan Zhi Hong, an oil analyst with China Merchant Futures in Shenzhen, after China's financial market closed for the day.
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