08/10/2010 (Bloomberg) - Palm oil futures rallied for a sixth week as a weak dollar increased the appeal of commodities as a hedge against inflation and as rival soybean oil advanced.

The contract for delivery in December added 1 percent to 2,760 ringgit ($887) a metric ton this week on the Malaysia Derivatives Exchange. The six-week rally is the longest since a seven-week advance that ended week of May 8, 2009.

The tropical commodity had been rallying as a weak dollar lifted the appeal of commodities as a hedge against inflation and as rival soybean oil advanced on increased Asian demand.

The dollar index, which tracks the greenback against six major currencies, has lost 0.6 percent so far this week. The measure fell 5.4 percent last month, sparking a global equity and commodity rally. Yesterday, the gauge reached the lowest level since Jan. 15, data compiled by Bloomberg show.

“Generally commodities have been gaining on the back of weakness in the dollar,” said Arhnue Tan, a senior analyst at ECM Libra Capital Sdn.

Shipments of Malaysian palm oil in September climbed 30 percent from August to 1.5 million tons, according to cargo surveyor Societe Generale de Surveillance. Rival Intertek put the gain at 21 percent. Malaysian stockpiles advanced 23 percent to 1.72 million tons in August from July, ending seven months of losses, the nation’s palm oil board said Sept. 15.

Palm oil “prices should be weaker next week,” ECM’s Tan said. “Production in September was likely quite strong.”

The board is expected to issue stockpiles, exports and output data for September on Oct. 11.

China Demand
November-delivery soybeans in Chicago added as much as 1.6 percent to $10.8225 a bushel, while December-delivery soybean oil gained as much as 1.7 percent to 44.88 cents a pound in Asia. Soybean and palm oils are direct substitutes.

U.S. suppliers sold 947,400 tons of the oilseed in the week ended Sept. 30, including 624,300 tons to China, the Department of Agriculture said yesterday. The Asian country is the biggest consumer of soybeans.

On the Dalian Commodity Exchange, palm oil for delivery in May closed little changed at 7,752 yuan ($1,161) a metric ton, giving up gains of as much as 1.5 percent earlier. Dalian May- delivery soybean oil lost 0.7 percent to 8,536 yuan.

CME Group Inc.’s December palm oil contract, pegged to the Malaysian benchmark price, jumped for a fifth day to the highest level since the exchange began trading in May. The most-active contract leapt as much as 1.5 percent to $903.25 a ton and was last at $890.25 at 3:30 p.m. Singapore time.