Updates closing prices and adds analyst quote

SINGAPORE, Aug 29 (Reuters) -Malaysian palm oil futures rose on Thursday, after a two-day losing streak, as traders covered short positions in the market, although the prospect of higher import taxes in India, the world's largest vegetable oil buyer, limited gains.

The benchmark palm oil contract FCPOc3 for November delivery on the Bursa Malaysia Derivatives Exchange closed up 22 ringgit, or 0.56%, to 3,942 ringgit ($915.04) a metric ton.

There is some short-covering in the palm oil market today, said Lingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari, noting that prices fell earlier in the session on the possibility of a tax rate hike in India, demand worries amid competitive prices of other oils and the ringgit's strength, said Supramaniam.

India is considering an increase in import taxes on vegetable oils to help protect farmers reeling from lower oilseed prices, two government sources said on Wednesday.

The move, likely to be announced in the coming weeks, could dampen demand and reduce overseas purchases of palm oil.

Indonesia is due to set its palm oil reference price and export tax and levy for September by the end of the month.

Meanwhile, Malaysia's palm oil product exports for Aug. 1-25 dropped between 14.1% and 14.9% from a month earlier, although the pace of exports picked up from a fall of 16.7% to 18.4% during Aug. 1-20, data from cargo surveyor Intertek Testing Services and independent inspection company AmSpec Agri Malaysia showed earlier this week.

Dalian's most-active soyoil contract DBYcv1 ticked 0.13% higher, while its palm oil contract DCPcv1 weakened 0.37%. However, soyoil prices on the Chicago Board of Trade BOcv1 climbed 1.33%.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

($1 = 4.3080 ringgit)

Reporting by Gabrielle Ng; Editing by Sumana Nandy and Eileen Soreng

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Vegetable oils OILS/ASIA1
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CBOT soyoil futures 0#BO:
CBOT soybean futures 0#S:
Indian solvent SOLVENT01
Dalian Commodity Exchange DC/MENU
Dalian soyoil futures 0#DBY:
Dalian refined palm oil futures 0#DCP:
Zhengzhou rapeseed oil 0#COI:
European edible oil prices/trades OILS/E