KUALA LUMPUR, May 5: Malaysian crude palm oil futures ended firmer on Thursday after short-covering in the final hours gave respite to a market worried about a possible currency revaluation. The Malaysian ringgit has been fixed at 3.8 to the dollar since 1998 and the government has repeatedly said it saw no reason to alter the peg despite economists suggestions that its value was higher now.

People are worried about what a re-peg or de-peg would do to their earnings, said an oils trader in the capital.

A higher ringgit will make palm oil, sold in dollars, more expensive. Malaysia is the largest palm oil producer and can influence the global prices of the commodity. The government has been saying the peg will stay, but that’s not what the market thinks, said the export manager at a foreign-owned palm oil trading house in Kuala Lumpur.

The way they are raising petrol prices without warning is an indication of what they might do to the peg. Pump prices of petrol and diesel rose by 7 per cent and 23 Per cent, respectively, on Thursday as the government moved to cut fuel subsidies. The latest hike, the third since October, came without warning.

The benchmark third-month palm oil contract on Bursa Malaysia Derivatives, July, closed up 2 ringgit at 1,413 ringgit a ton ($371.84). It earlier hit an intraday low of 1,405 ringgit, just above the 1,400 ringgit psychological support.

Other traded months ended unchanged to up 3 ringgit. Overall volume was 5,395 lots of 25 tons each — slightly below the 6,000 lots typically seen in an active session.

Palm oil futures fell 1.5 per cent on Wednesday after a lack of supportive factors, and bearish estimates of palm oil exports for April released earlier in the week.

They opened up on Thursday, helped by higher prices of rival US soyaoil, and fell by midday on fears over the ringgit peg before recovering on short-covering. In the physical crude palm oil market, May contract saw bids closing at 1,415 ringgit a ton, against offers at 1,420.

Bids/offers for June closed at 1,415/1,425 ringgit a ton. Trades for May were reported at 1,415-1,412.50 ringgit a ton in both the southern and central regions of Malaysia.—Reuters