MARKET DEVELOPMENT
VEGOILS-Palm Oil Ends Higher After Ringgit Hits 3-Month Low
VEGOILS-Palm Oil Ends Higher After Ringgit Hits 3-Month Low
20/12/2013 (Reuters) - Malaysian palm oil futures ended higher on Thursday, buoyed by a recovery in competing soy markets overseas, and as investors covered short positions in anticipation of a further fall in the ringgit.
The Malaysian ringgit fell to a three-month low on Thursday, weakening against the greenback alongside other emerging Asian currencies after the U.S. Federal Reserve said it would start scaling back its mega monetary stimulus.
Market players and analysts expect the ringgit to stay weak for now and depreciate further if the U.S. continues to unwind its stimulus, while Malaysia's overnight policy rate is kept at 3.00 percent. A weak ringgit makes palm feedstock cheaper for overseas buyers.
"The ringgit is expected to weaken further to 3.30, and that triggered some short-covering," said a trader with a local commodities brokerage. The ringgit was trading at 3.2750 by late Thursday.
"But whether we'll see any follow-through buying will depend on how investors are going to close their books at the end of the year," the Malaysia-based trader added.
The benchmark March contract on the Bursa Malaysia Derivatives Exchange had edged up 0.8 percent to 2,572 ringgit ($787) per tonne by Thursday's close.
Total traded volume stood at 19,796 lots of 25 tonnes, below the average 35,000 lots.
A recovery in soy markets in the United States and China tracked by palm lifted prices of the tropical oil as well.
The U.S. soyoil contract for January rose 0.1 percent in late Asian trade, while the most active May soybean oil contract on the Dalian Commodities Exchange edged down 0.1 percent, posting smaller declines than seen on Wednesday.
Analysts say the U.S. tapering would make dollar-priced edible oils more expensive and turn buyers to other alternatives such as palm.
"The. U.S.-denominated soybean oil and oilseeds may be comparatively expensive to external buyers due to the dollar strength," said Phillip Futures analyst Tan Chee Tat.
"As such, it may help to reverse the recent strong substitution, garnering more external demand for palm oil," Tan added.
Malaysia's Meteorological Department expects another round of monsoon rains to hit several states in Peninsular Malaysia from Friday to Sunday, its website showed on Thursday.
Heavy rains could cause floods in low-lying areas, the department warned, including in palm-growing states of Johor and Pahang. Floods complicate harvesting and transportation of palm and could tighten December supplies of the tropical oil.
In other markets, Brent crude oil futures held steady at over $109 a barrel on Thursday as the market shrugged off a move by the U.S. Federal Reserve to reduce its monetary stimulus programme, and remained focused on U.S. crude stock draws.
Palm, soy and crude oil prices at 1016 GMT
Contract Month Last Change Low High Volume
MY PALM OIL JAN4 2523 +21.00 2511 2533 257
MY PALM OIL FEB4 2553 +20.00 2535 2565 2550
MY PALM OIL MAR4 2572 +20.00 2558 2584 12032
CHINA PALM OLEIN MAY4 6028 +12.00 6010 6078 572124
CHINA SOYOIL MAY4 6952 -10.00 6950 7016 642444
CBOT SOY OIL JAN4 39.08 +0.02 39.05 39.26 2665
NYMEX CRUDE JAN4 97.79 +0.05 97.50 97.87 1056
Palm oil prices in Malaysian ringgit per tonne
CBOT soy oil in U.S. cents per pound
Dalian soy oil and RBD palm olein in Chinese yuan per tonne
Crude in U.S. dollars per barrel
($1 = 3.27 Malaysian ringgit)
The Malaysian ringgit fell to a three-month low on Thursday, weakening against the greenback alongside other emerging Asian currencies after the U.S. Federal Reserve said it would start scaling back its mega monetary stimulus.
Market players and analysts expect the ringgit to stay weak for now and depreciate further if the U.S. continues to unwind its stimulus, while Malaysia's overnight policy rate is kept at 3.00 percent. A weak ringgit makes palm feedstock cheaper for overseas buyers.
"The ringgit is expected to weaken further to 3.30, and that triggered some short-covering," said a trader with a local commodities brokerage. The ringgit was trading at 3.2750 by late Thursday.
"But whether we'll see any follow-through buying will depend on how investors are going to close their books at the end of the year," the Malaysia-based trader added.
The benchmark March contract on the Bursa Malaysia Derivatives Exchange had edged up 0.8 percent to 2,572 ringgit ($787) per tonne by Thursday's close.
Total traded volume stood at 19,796 lots of 25 tonnes, below the average 35,000 lots.
A recovery in soy markets in the United States and China tracked by palm lifted prices of the tropical oil as well.
The U.S. soyoil contract for January rose 0.1 percent in late Asian trade, while the most active May soybean oil contract on the Dalian Commodities Exchange edged down 0.1 percent, posting smaller declines than seen on Wednesday.
Analysts say the U.S. tapering would make dollar-priced edible oils more expensive and turn buyers to other alternatives such as palm.
"The. U.S.-denominated soybean oil and oilseeds may be comparatively expensive to external buyers due to the dollar strength," said Phillip Futures analyst Tan Chee Tat.
"As such, it may help to reverse the recent strong substitution, garnering more external demand for palm oil," Tan added.
Malaysia's Meteorological Department expects another round of monsoon rains to hit several states in Peninsular Malaysia from Friday to Sunday, its website showed on Thursday.
Heavy rains could cause floods in low-lying areas, the department warned, including in palm-growing states of Johor and Pahang. Floods complicate harvesting and transportation of palm and could tighten December supplies of the tropical oil.
In other markets, Brent crude oil futures held steady at over $109 a barrel on Thursday as the market shrugged off a move by the U.S. Federal Reserve to reduce its monetary stimulus programme, and remained focused on U.S. crude stock draws.
Palm, soy and crude oil prices at 1016 GMT
Contract Month Last Change Low High Volume
MY PALM OIL JAN4 2523 +21.00 2511 2533 257
MY PALM OIL FEB4 2553 +20.00 2535 2565 2550
MY PALM OIL MAR4 2572 +20.00 2558 2584 12032
CHINA PALM OLEIN MAY4 6028 +12.00 6010 6078 572124
CHINA SOYOIL MAY4 6952 -10.00 6950 7016 642444
CBOT SOY OIL JAN4 39.08 +0.02 39.05 39.26 2665
NYMEX CRUDE JAN4 97.79 +0.05 97.50 97.87 1056
Palm oil prices in Malaysian ringgit per tonne
CBOT soy oil in U.S. cents per pound
Dalian soy oil and RBD palm olein in Chinese yuan per tonne
Crude in U.S. dollars per barrel
($1 = 3.27 Malaysian ringgit)