TOKYO (March 17): Benchmark Tokyo rubber futures surged 3% on Thursday, hitting a one-week high, as strong gains in crude oil prices after a dovish statement by the U.S. Federal Reserve boosted risk appetite and outweighed the yen’s gain.
Rubber tends to track overall commodity markets, especially oil. Higher crude oil boosts the price of synthetic rubber, a petroleum product, which helps bolster the price of natural rubber.
The Tokyo Commodity Exchange (TOCOM) rubber contract for August delivery finished 5.1 yen or 3.0% higher at 175.6 yen (US$1.57) per kg. The contract rose to a session-high of 177.0 yen, a price not hit since March 10.
“A bounce in prices of oil and other commodities, along with an overnight gain in Shanghai rubber futures, prompted buys from an opening,” said Toshitaka Tazawa, analyst at Fujitomi Co.
The Fed held interest rates steady on Wednesday and fresh projections showed policymakers expected two rate hikes by the end of 2016, half the number seen in December.
That signal pushed the dollar to a three-week low against the yen and also led to gains in the commodities market, which boost the fortune of rubber.
Oil futures extended their gains, helped also as a number of large producers nailed down a date for an output freeze meeting. Industrial metals such as copper saw their biggest rise in two weeks.
“Investors’ risk appetite revived on the back of firmer commodity prices, but further gains in the TOCOM rubber may be limited because of the yen’s climb,” Tazawa said.
A stronger yen makes yen-denominated assets less affordable, when purchased in other currencies.
The most-active rubber contract on the Shanghai futures exchange for May delivery rose 265 yuan to finish at 11,460 yuan (US$1,765.30) per tonne.
The front-month rubber contract on Singapore’s SICOM exchange for April delivery last traded at 127.5 U.S. cents per kg, up 1.9 cent.
(US$1 = 6.4918 Chinese yuan renminbi)
(US$1 = 111.7200 yen)
