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Palm rises after Fed statement, lifted by overseas veg oil markets

Palm rises after Fed statement, lifted by overseas veg oil marketsKUALA LUMPUR: Malaysian palm oil futures edged higher on Thursday, supported by a dollar-induced rally in overseas vegetable oil markets that helped benchmark prices move further away from seven-week lows.

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

The benchmark June contract on the Bursa Malaysia Derivatives edged up 0.2 percent to 2,198 ringgit ($ 598) a tonne by Thursday’s midday break, after earlier rising to 2,222 ringgit – the highest since March 13.

Gains elsewhere were more pronounced, with the US soyoil contract for May up 1.1 percent in early Asian trade, while the most active September soybean oil contract on the Dalian Commodity Exchange climbed 1.8 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. “The Fed’s move to further the interest rate hike sent the dollar lower, a supportive factor for commodities.”

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

“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 trader put the immediate support level for palm at 2,180 ringgit, with a resistance at 2,240 ringgit.

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

Total traded volume stood at 22,795 lots of 25 tonnes, much higher than the average 12,500 lots.

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

In other markets, Brent crude futures fell towards $ 55 a barrel on Thursday after a bigger than expected crude stock build in the United States. Prices in the previous session jumped as much as 6 percent on the dollar’s tumble.

Copyright Reuters, 2015

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