TOCOM rubber rises nearly 2% on yen’s slide, higher oil

TOKYO (March 28): Benchmark Tokyo rubber futures rose nearly 2 percent on Monday, backed by a softer yen against the dollar, following comments from a regional Federal Reserve official that the U.S. central bank may raise interest rates as early as next month.

St. Louis Fed President James Bullard said in an interview with the Nikkei that the U.S. central bank may raise interest rates in April or June. That followed a slew of remarks of other Fed officials who supported expectations of more tightening.

Tokyo Commodity Exchange (TOCOM) futures, which set the tone for tyre rubber prices in Southeast Asia, also got support from firmer oil prices, dealers said.

Oil prices rose on Monday after a three-day break, adding to gains in recent weeks as optimism holds that a production freeze among major producers may be implemented, but volumes were thin as a number of markets remain on holiday for Easter.

The new TOCOM rubber contract for September delivery, which technically started trading in evening trade on Friday, finished at 180.5 yen (US$1.59) per kg, up 3.3 yen or 1.9%, from its opening price of 177.2 yen. It earlier rose to a high of 181.2 yen.

“The rubber prices climbed, after the yen lost ground,” said Satoru Yoshida, commodity analyst at Rakuten Securities.

The dollar rose 0.4% to 113.51 yen, keeping intact its steady recovery from a 6-1/2-month low of 110.67 hit on March 17, after a Fed meeting that left markets convinced U.S. interest rates would not rise soon.

A weaker yen makes yen-denominated assets more affordable, when purchased in other currencies.

The yen’s weakness also gave Japan’s Nikkei a 0.8% boost to hit its highest close in two weeks.

“The TOCOM benchmark will likely try to stay above 180 yen this week. If successful, the price will get stronger momentum,” Yoshida said.

The most active rubber contract on the Shanghai futures exchange for September delivery fell 85 yuan to finish at 11,540 yuan (US$1,771.35) per tonne.

The front-month rubber contract on Singapore’s SICOM exchange for April delivery last traded at 129.8 U.S. cents per kg, down 0.1 cent.

(US$1 = 6.5148 Chinese yuan)
(US$1 = 113.4100 yen)