Malaysian palm oil futures rose to their highest in over five weeks on Thursday as the Malaysian currency slipped to its lowest since early May and stoked buying interest, although some profit-taking in late trade eroded gains. The Malaysian ringgit fell to a four-month low ahead of the central bank's monetary policy decision, weakening 0.8 percent to 3.2425 against the greenback, and making palm oil cheaper for overseas buyers and refiners.
Bank Negara Malaysia said late Thursday it will keep the country's key interest rate unchanged at 3.25 percent. However, mild profit-taking in afternoon trade eroded some of the gains, traders said. But hopes that the weaker currency will stoke demand for the ringgit-priced feedstock prevented steeper losses.
The benchmark December contract on the Bursa Malaysia Derivatives Exchange closed 0.1 percent higher at 2,145 ringgit ($664) per tonne. Prices earlier rose to 2,173 ringgit the highest level since August 13. Total traded volume stood at 74,838 lots of 25 tonnes, more than double the usual 35,000 lots. Technicals showed that palm oil is expected to climb to 2,213 ringgit per tonne as it has broken resistance at 2,142 ringgit, said Reuters market analyst Wang Tao.
Expectations that the robust export demand seen in the first half of September will hold into next month also provided support to palm, traders said. Exports of Malaysian palm between September 1 and September 15 jumped about 180,000 tonnes compared with a month ago, with demand for crude palm oil surging. The tropical oil has pulled up more than 200 ringgit after plunging to a five-and-a-half-year low of 1,914 ringgit on September 2, and is now on track for its biggest monthly gain since October 2013 with an 11 percent rise so far in September.
But gains in palm oil will also narrow its discount to competing vegetable oils and potentially water down food and fuel demand from key buyers such as China and India. In rival vegetable oil markets, the US soyoil contract for December edged down 0.4 percent in late Asian trade, while the most active January soybean oil contract on the Dalian Commodities Exchange rose 0.1 percent.