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Rubber Poised for Second Monthly Drop Amid Fed Tapering Bets

Rubber declined for the first time in four days as speculation the Federal Reserve may cut stimulus sooner than previously expected weighed on investor sentiment.

The contract for delivery in April, the most active by volume on the Tokyo Commodity Exchange, lost as much as 1.3 percent to 261 yen a kilogram ($2,651 a metric ton) and was at 261.3 yen at 11:34 a.m. local time. Futures fallen 1.7 percent this month.

The Fed maintained its $85 billion in monthly bond purchases yesterday, saying it needs to see more evidence that the economy is improving while noting signs of “underlying strength.”

“Speculation on Fed tapering was negative for rubber,” said Megumi Saito, a trader at commodity broker Yutaka Shoji Co. in Tokyo. “An increase in stockpiles also puts pressure on prices.”

Crude rubber stockpiles held at Japanese warehouses rose 21 percent to 5,314 tons on Oct. 20, according to data from the Rubber Trade Association of Japan.

The market will remain in a surplus this year and next year, though below 250,000 tons, Macquarie Group said in a report dated Oct. 29. Consumption will grow 2.8 percent this year and 3.4 percent in 2014, the bank said.

Rubber for May delivery on the Shanghai Futures Exchange fell 1.9 percent to 19,685 yuan($3,231) a ton. Thai rubber free-on-board rose 0.3 percent to 78.35 baht ($2.52) a kilogram yesterday, recovering from a three-week low, according to the Rubber Research Institute ofThailand.

Source: Bloomberg

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