TOKYO (April 6): Benchmark Tokyo rubber futures closed slightly lower on Wednesday, after hitting their highest level in nearly seven-and-a-half months earlier in the session, as a flurry of profit-taking suddenly kicked in during afternoon trade.
Tokyo Commodity Exchange (TOCOM) futures, which set the tone for tyre rubber prices in Southeast Asia, started the day with a positive tone and headed for their fourth straight session of gains on the back of higher oil prices, but lost ground in afternoon trade on technical selloff, dealers said.
The TOCOM rubber contract for September delivery <0#2JRU:> finished 0.2 yen lower at 180.6 yen (US$1.64) per kg. Earlier in the day it jumped more than 4% to 188.4 yen, the highest since Aug 18 last year.
“There were no fundamental news to turn the market around that suddenly,” said a Tokyo-based dealer.
“But I assume traders who stepped up buys in early trade started booking profits after seeing fewer buys than they had anticipated at above the March’s high of 184.6 yen,” the dealer added.
The selloff came despite stronger oil prices. Crude futures jumped on Wednesday as hopes for an agreement among exporters to freeze output underpinned the market, although persistent global oversupply and Iran’s plans to boost production pressured physical oil prices.
Putting pressure, the US dollar hovered near a 17-month low against the yen after taking a fresh knock overnight on comments by Japan’s prime minister which suggested that authorities were cautious towards arresting the yen’s appreciation.
The dollar inched up 0.1% to 110.51 yen but remained in striking distance of 109.92, its lowest level since Oct. 31, 2014 hit late on Tuesday.
“Turnover of TOCOM rubber has been low since last month. Because of that, the rubber prices are so volatile,” said the dealer.
Some market participants speculate the crop-damaging El Nino weather pattern may crimp rubber output, but the actual impact is still unknown, dealers said.
“It’s possible that the wintering season lasts longer than usual or output after the wintering season does not pick up as fast as usual due to the El Nino effect, but that may not happen either,” a trader in Tokyo said.
Rubber is tapped year round but latex output drops during the dry wintering season, when trees shed leaves. Wintering in Thailand and Malaysia lasts from February to April.
The most-active rubber contract on the Shanghai futures exchange for September delivery rose 45 yuan to finish at 11,615 yuan (US$1,792.00) per tonne.
The front-month rubber contract on Singapore’s SICOM exchange for May delivery last traded at 141.3 US cents per kg, up 2.0 cent.
(US$1 = 110.3700 yen)
(US$1 = 6.4816 Chinese yuan)
