Malaysian palm oil futures retreated from two sessions of gains to trade lower on Monday as the ringgit strengthened to its strongest level in more than a week and as expectations of lower post-Ramadan demand hit sentiment.
A stronger ringgit weighed down on palm, with the Malaysian currency hitting 4.0800 per dollar on Monday, its strongest level since May 27 after downbeat US jobs data lowered expectations of a rate hike in June.
The ringgit gained 1.2% against the dollar to reach 4.0950 in the evening, making palm oil more expensive for foreign currency holders.
The palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange was down 0.3% at RM2,659 (US$649) per tonne on Monday at the close of trade.
Traded volume stood at 44,927 lots of 25 tonnes each in the evening, compared with the 2015 average of 44,600.
"The stronger ringgit is the primary concern today," said a trader from Kuala Lumpur, adding palm was expected to trade range-bound in the coming days.
"I see a slowdown in June demand, it won't be as strong as before and output is also on the rising trend."
Palm oil production rises seasonally in the second and third quarters of the year, adding to stockpiles and capping gains on palm prices.
Post-Ramadan demand is also seen slowing in June, pulling down palm prices.
Palm oil demand usually rises a month before Ramadan and tapers off afterward. The holy month-long festival which began on Monday sees Muslims breaking their fast with communal feasting, incurring a higher demand of palm oil for cooking purposes.
May exports are seen rising 13% from a month ago, according to a Reuters poll, while output is forecast to rise 3.9%. End-stocks in Malaysia, the world's second largest palm producer, are expected to fall 8.8% to 1.64 million tonnes.
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