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Palm oil hits 6-week high; weak ringgit supports

Palm oil hits 6-week high; weak ringgit supportsKUALA LUMPUR: Malaysian palm oil futures rose to a six-week high on Thursday due to a weaker ringgit, though data showing rising production and inventory weighed on sentiment.

The benchmark November contract on the Bursa Malaysia Derivatives Exchange reached a high of 2,159 ringgit ($ 498.96) per tonne in intraday trading before ending the day 2 percent higher at 2,156 ringgit.

Traded volume stood at 54,653 lots of 25 tonnes each, well above the average of 35,000 lots at the end of the trading day.

“The rise in production and stockpiles was within market expectations, the ringgit is the main factor driving the market today,” said a Kuala Lumpur-based trader.

Malaysia’s palm oil stocks at the end of August rose 10 percent to 2.49 million tonnes from a revised 2.27 million tonnes at the end of July, industry regulator Malaysian Palm Oil Board (MPOB) said.

Palm oil output in the world’s second largest producer rose 12.96 percent in August from a month earlier, data released by MPOB showed.

Palm oil is expected to rise to 2,171 ringgit as it has broken a resistance at 2,113 ringgit, said Wang Tao, Reuters market analyst for commodities and energy technicals.

The Malaysian currency has provided some support to the vegetable oil in recent weeks as a weaker ringgit makes palm cheaper for offshore buyers. It is emerging Asia’s worst performing currency this year, having lost nearly 20 percent so far. It lost nearly 1 percent against the dollar at 4.3270 on Thursday.

In competing vegetable oil markets, the most active January soybean oil contract on the Dalian Commodity Exchange was 0.4 percent higher, while the US December soyoil contract was up 1.3 percent.

Crude oil prices edged higher on Thursday ahead of weekly US stocks data, despite signs of an economic slowdown in China and Japan, which would lower the demand for oil.

Palm oil often takes price direction from crude oil, as vegetable oils are increasingly used in making renewable fuels.

Copyright Reuters, 2015

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