Palm oil stocks as a hedge against a falling currency

It's no secret that palm oil is an international commodity.

From the Edge:

LA LUMPUR (Jan 14): Palm oil output in Malaysia may fall further this month as the aftermath of monsoon flooding takes its toll on yields that are already low for seasonal reasons, while growers in Borneo were now braced for the monsoon, which has shifted to that region.

Malaysia's weather office forecast better conditions over the peninsular region in the coming week, dispelling fears of a fresh wave of flooding in the coastal states of Kelantan, Terengganu and Pahang, which were hardest hit by last month's rain.

Palm oil is generally seen as a boring commodity, but it does have certain desirable properties.  For one, although it is priced in ringgit, Europeans buy the palm oil in US dollars.    The truth is,  it's kind of a running joke to have palm oil priced in ringgit as most of it is sold to foreign countries.

So, the net effect is that Palm oil companies won't be affected much by a weakening currency, with costs in Ringgit, while their revenues are in US dollars.  The majority of palm oil companies will see a bit of tasty profit.

China floating is more about the Euro than bowing down to US pressure

From the WSJ:

A Chinese central bank adviser gave an upbeat assessment on the euro's long-term outlook and said global financial markets may have overreacted to the European sovereign-debt crisis.

Li Daokui, an academic adviser to the People's Bank of China, also told a financial forum on Friday that a major appreciation of the yuan is "impossible" because China's international payments are relatively balanced.

He repeated the official stance that the yuan float will be in two directions.

His views may not necessarily reflect the central bank's thinking, though he is at a position that his view can be heard by decision makers.

The comments came after the yuan rose to a modern-era high against the U.S. dollar on the eve of the Toronto summit of the Group of 20 industrialized and developing nations. Many analysts said the yuan would return to gradual gains in the week ahead, as Beijing won't be willing to see sharp rises in the yuan hurting local exporters.

A week ago, China removed its peg to the U.S. dollar, in place for nearly two years, returning the currency to a managed-float system that references the yuan to a basket of currencies that includes the euro. China's officials have said the move will help ease the pressure on the yuan to appreciate against the euro amid the euro-zone debt crisis.

China does what it wants for their own sake and doesn't really care about international pressure. They see the potential for the Euro weakening against the US dollar to threaten their exports. If they remained pegged to the US dollar, they lack tools to combat the Euro decline!

China moved to a float why? in order to have the flexibility to manage their currency against the Euro, NOT because the US wants to brand them a currency manipulator. Perhaps the Euro might rise in this case. I believe currency traders have caught on this idea. Euro shorts better be careful!

China's peg was released on the weekend, Wednesday Euro rallies while stock markets fall.

This is shaping out to be a battle royale! China and US versus the EU. Is China taking on more than it can chew in managing its currency against both US and Europe?