Malaysian crude palm oil futures fell more than 3 percent on Thursday, as slow demand in the physical market and strengthening ringgit prompted selling. Palm oil, which has lost more than 10 percent since it hit a historic high of 4,486 ringgit a tonne on Tuesday.
Bucked its usual trend of tracking crude oil and Chicago soybean oil markets, dealers said. The benchmark May contract on the Bursa Malaysia Derivatives Exchange fell as much as 137 ringgit, or 3.3 percent, to 3,958 ringgit ($1,244) a tonne. It finished at 4,003 ringgit a tonne.
"The physical buying is very slow and the market is trying to come down to attract buyers who have vanished from the market because of the volatility in the last few days," said one dealer with a domestic brokerage. Traders said the rising Malaysian ringgit against the dollar also contributed to the market's decline.
"The ringgit is reducing margins and making palm oil more expensive, so today's fall is also due to that factor," another palm oil trader said. "It is after a long time that palm oil is kind of ignoring soybean oil and crude oil markets."
The Malaysian ringgit hit its highest level in more than a decade on Thursday on heightened expectations of a US rate cut in March after weak US economic data.
The ringgit rose 0.3 percent to hit 3.17 per dollar, its highest since October 1997. It was trading at 3.165 to a dollar at 1052 GMT. A stronger Malaysian currency makes the ringgit-based commodity expensive for overseas buyers.
Chicago Board of Trade soyoil was up 0.2 percent, while China's Dalian soybean oil futures September contract finished down 3.2 percent. Global vegetable oil prices often track energy markets as rapeseed and soybean oils get channelled into biodiesel in Europe and America.
Oil held near $104 on Thursday, retaining most of the previous day's gains to record highs due a drop in US oil inventories and Opec's decision to leave output unchanged. In Malaysia's physical market, crude palm oil for March shipment in the southern region was quoted at 3,990/4,040 ringgit a tonne. Trades were done at 4,040 ringgit.