KUALA LUMPUR, Jan 21 (Reuters): Malaysian palm oil futures fell to their lowest in over two weeks on Wednesday, after worries over monsoon floods Borneo's key palm-growing areas triggered a round of technical selling in the tropical oil.
The ringgit's decline to its weakest since April 2009 was not enough to limit losses in time, traders said.
"Although the ringgit is weak, the market could not keep up. After prices broke 2,300 ringgit, heavy liquidation and the stop-loss order were triggered," said one trader with a foreign commodities firm in Kuala Lumpur.
The benchmark April contract was down 2.0 per cent to 2,273 ringgit ($629) per tonne by Wednesday's close, with prices touching 2,270 ringgit, their lowest since Jan. 5.
Traded volume was at 66,335 lots of 25 tonnes, nearly double the usual average of 35,000 lots.
The Malaysian ringgit hit a near six-year low of 3.6250 per dollar as Fitch Ratings warned of a downgrade to the country's rating, following government moves to cut its 2015 growth forecast, trim spending and widen its fiscal deficit target.
The slump in the ringgit also stoked worries over a gloomy global economic outlook that could hurt commodity prices, including palm oil, the world's most traded vegetable oil.
"All this doesn't bode well ... the ringgit is down, the share market is down," said a second Malaysia-based trader. "I wouldn't be surprised if funds are being withdrawn from markets."
Technicals showed palm oil still targeting a range of 2,214-2,248 ringgit per tonne, as indicated by its wave pattern and a Fibonacci ratio analysis, according to Reuters market analyst Wang Tao.
Analysts say flooding in Sarawak, Malaysia's second-largest palm producing state, may not be as damaging to output as initially feared, when thunderstorms and rain triggered flash floods across some plantations.
"Many areas in Sarawak remain flooded following heavy continuous rainfall over the last three days," said Affin Hwang Capital Research in a note on Wednesday.
"However, as yet, the operations of the timber and plantation companies have not been seriously affected by the floods."
In other markets, oil edged above $48 a barrel on Wednesday, consolidating after a drop in the previous session, although traders and analysts said oversupply and the prospect of inventory rises made further weakness likely.
