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Palm edges higher, supported by US, China veg oil

Palm edges higher, supported by US, China veg oilKUALA LUMPUR: Malaysian palm oil futures edged further away from seven-week lows on Thursday as the US dollar’s slide inspired a rally in overseas vegetable oil markets.

The dollar suffered its biggest one-day fall in six years after the Federal Reserve signalled a slower pace of interest rate increases, which in turn boosted prices of commodities from oil to soybeans to gold.

The benchmark June contract on the Bursa Malaysia Derivatives edged up 0.6 percent to 2,206 ringgit ($ 596) a tonne by Thursday’s close. Prices were choppy, trading between 2,222 ringgit, the highest since March 13, and 2,165 ringgit.

The US soyoil contract for May was up 0.5 percent in late Asian trade, while the most active September soybean oil contract on the Dalian Commodity Exchange climbed 1.6 percent. Dalian RBD palm oil futures for September surged nearly 4 percent to 4,774 yuan ($ 771) a tonne.

“There’s bargain buying and short covering as the dollar sinks,” said one Malaysia-based palm trader, adding that the Fed’s signal it was no rush to raise rates had sent the dollar lower, providing support for commodities.

Market players said palm’s gains were relatively subdued, however, as the tropical oil struggles with poor global demand and abundant supplies of competing oils.

“The market is up a bit today on the back of the rally of US soybean oil, and RBD palm oil,” said a second trader with a commodities brokerage in Kuala Lumpur. “The market is adjusting and trying to hold for now.”

The benchmark palm contract hit a near seven-week low of 2,128 ringgit on Wednesday as weak crude and soy prices raised concerns that palm would lose more market share as a fuel and for food.

Total traded volume stood at 55,578 lots of 25 tonnes, much higher than the average 35,000 lots.

The world’s top palm producer Indonesia said it was considering lowering the threshold applied to its monthly export tax for crude palm oil to between $ 500-$ 600 a tonne from $ 750.

“Downstream players are likely beneficiaries of this move as they would be able to enjoy a wider processing margin due to the export tax differential between processed palm products and crude palm oil,” said CIMB analyst Ivy Ng on Thursday.

Copyright Reuters, 2015

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