Palm oil dropped for a third day to its lowest level in two weeks as a rallying dollar reduced the appeal of commodities as alternative investments.
The Dollar Index, which tracks the greenback against the currencies of six major US trading partners, has climbed 4.5 per cent since the end of November, after sliding in all but one of the last nine months. It reached a three-month high yesterday.
“The strengthening dollar has been the main influence for lower soy and palm oil price this week,” Ryan Long, a trader at OSK Investment Bank in Kuala Lumpur, said.
March-delivery palm oil declined as much as 1.3 per cent to 2,482 ringgit ($721) a tonne on the Malaysia Derivatives Exchange before closing at 2,500 ringgit in Kuala Lumpur. The price has surged 47 per cent this year on demand from India and China, the biggest consumers of edible oils.
Futures reached 2,628 ringgit a ton on December 17, a six-month high, raising concern the rally may curb demand for the tropical oil used in food and biofuel. Crude oil traded steady above $74 a barrel in New York before a US Energy Department report that may show oil stockpiles fell last week as temperatures dropped.
“Oil is correcting and that’s lowering palm oil prices,” said Harish Galipelli, vice president at Kochi-based JRG Wealth Management Ltd. “There was a substantial increase in palm oil prices in a very short period.”
Soybeans production in Brazil and Argentina may total 116 million tonnes next year, up 30 per cent, the US Department of Agriculture said in a December 10 report. Soybean oil and palm oil are substitutes.
“Improving soybeans crop prospect in South America and expectation of higher crude palm oil import into Malaysia also weigh on market,” OSK’s Long said.
