Malaysian palm oil futures rose about 2 percent on Monday, reaching their highest intraday levels in more than a week, supported by gains in rival oils and a weaker ringgit. The Malaysian currency was at its weakest in more than 13 months after the central bank said it would take action against individuals or banks who traded ringgit in the offshore non-deliverable forward (NDF) market.
Spot ringgit fell 0.4 percent to 4.4300 per dollar, an intraday low, and its weakest since October 2, 2015. Weakness in the ringgit, the currency that palm oil is traded in, lends support to palm prices as it makes the tropical oil cheaper for holders of foreign currencies. Benchmark palm oil futures for February delivery on the Bursa Malaysia Derivatives Exchange were up 1.7 percent at 2,919 ringgit ($661) a tonne at the end of the trading day. They earlier hit a peak of 2,931 ringgit, their highest since November 11.
Traded volumes stood at 43,561 lots of 25 tonnes each, just below the 2015 daily average of 44,600 lots. Palm was also supported by stronger performing rival oils, said one futures trader from Kuala Lumpur, referring to related edibles oils on the Chicago Board of Trade (CBOT) and China's Dalian Commodity Exchange.
"Overall, overseas commodity markets are up. The ringgit should stay weak and continue to hold the market," the trader said. "Lower production will also lend support while only poor exports will limit palm's upside." Palm oil output this year has been hit by the dry weather effects of last year's El Nino. Malaysian production in October fell by 2.2 percent from the previous month to its lowest level for the month since 2010.
Malaysian exports of palm oil shipments for November 1-20 dropped 8-9 percent from a month earlier, cargo surveyor data showed. The December soyabean oil contract on the CBOT rose 1 percent, while the January soyabean oil contract on the Dalian Commodity Exchange gained 1.5 percent.
In related vegetable oils, the January contract for palm olein on the Dalian Commodity Exchange was up 2.4 percent. Palm oil is expected to test a resistance at 2,934 ringgit per tonne, a break above which could lead to a gain to the next resistance at 2,963 ringgit, Wang Tao, a Reuters market analyst for commodities and energy technicals, said.
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