Malaysian palm oil slipped from three-year highs hit earlier on Monday as traders booked some profits on the stronger ringgit, pausing a rally driven by erratic weather curbing output. Floods in Malaysia's Johor and Sabah states last week slowed palm oil harvesting, triggering a surge in prices before the long weekend holiday.
Although the rains and floods have eased, traders are expecting lower production. "Investors are uncertain about the weather condition, that's why prices went positive and minus. Some of them are liquidating their positions now, but there aren't lots of movements as many people still on (Lunar New Year) holiday," said a trader in Kuala Lumpur.
By midday, the benchmark April crude palm oil contract on Bursa Malaysia Derivatives fell half percent to 3,874 ringgit ($1,272.877) per tonne. Earlier in the session, the contract went as high as 3,915 ringgit - a level unseen since March 10, 2008. Overall traded volume were 8,497 lots of 25 tonnes each, compared to the usual 7,500 lots.
A stronger Malaysian currency against greenback also prompted refiners to stay at the sideline as a firmer ringgit makes profits for dollar-priced commodities like palm oil and soyaoil less lucrative for them. "Stronger ringgit versus US dollar will limit upside as margin for refiners were deteriorated," the same trader added.
Reuters technical analysis showed Malaysian palm oil prices may hover around 3,905 per tonne on Monday before it resumes its uptrend towards a bullish target at 4,060 ringgit. US March soyaoil contract rose 0.4 percent in Asian trade hours, moving in tandem with firmer crude oil futures that were supported by the political crisis in Egypt and stronger US economic data. China financial markets are still closed for Lunar New Year holiday, trade to resume on February 9.
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