(May 27): Malaysian palm oil futures fell at closing trade on Friday evening, weighed down by a stronger ringgit which triggered some selling, but recorded its first weekly gain in three on expectations of lower-than-expected output and steady Ramadan demand.
The ringgit hit 4.0600 per dollar earlier in the day, its strongest level in more than a week, before settling at 4.0760 on Friday evening.
A stronger ringgit, the currency of trade for palm oil, makes it cheaper for holders of foreign currencies.
The palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange declined 0.8% to reach RM2,558 (US$628) per tonne in the evening, after hitting an intraday low of RM2,555.
Palm has gained for three out of five sessions so far this week and was up 2% on the week, on track for its first weekly gain in three weeks.
It rose 1.4% on Thursday.
Traded volumes stood at 51,908 lots of 25 tonnes each on Friday evening, compared with a 2015 daily average of 44,600.
"The ringgit was stronger in the morning, which started some profit-taking," a trader from Kuala Lumpur said.
"Not helping is the demand side; we are sitting in the month for Ramadan demand now but not seeing much activity."
Another trader added that the market likely fell on technical selling triggered by the stronger ringgit.
Demand for palm oil usually comes in one to two months before Ramadan, which begins in early June this year. The Muslim holy season is a month of fasting and feasting, which sees higher demand for palm oil used in cooking.
Leading up to Ramadan, Malaysian palm oil shipments have gained 8%–11% over May 1–25 from last month, according to cargo surveyor data.
Better demand for palm oil and lower-than-expected output are expected to dent current stockpile levels, supporting benchmark prices
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