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Thursday, August 11, 2022

TOCOM rubber extends losses on China devaluation concerns

TOKYO (Aug 12): Benchmark Tokyo rubber futures extended losses on Wednesday, falling to near Monday’s 7-month low, as concerns over China’s currency devaluation for a second straight day weighed on global commodities and stock markets.

The Tokyo Commodity Exchange (TOCOM) rubber contract for January delivery <0#2JRU:> finished 1.9 yen, or 1.0 percent, lower at 194.1 yen ($1.56) per kg. It earlier dropped to a low of 191.7 yen, near Monday’s intraday low of 191.1 yen which was the lowest since Jan 21.

TOCOM futures, which set the tone for tyre rubber prices in Southeast Asia, have lost more than 20 percent since hitting a 16-month high in early June.

“China’s currency policy underlines its focus to drive exports, which disappointed some investors who had hoped for a boost in domestic consumption,” said Satoru Yoshida, commodity analyst at Rakuten Securities.

On Wednesday, the People’s Bank of China set the yuan’s midpoint rate weaker than Tuesday’s closing market rate, which had already fallen sharply after China devalued its currency by nearly 2 percent in a surprise move.

As a result, China’s yuan hit a four-year low on Wednesday, sparking fears of a global currency war and accusations that Beijing was unfairly supporting its struggling exporters.

Chinese economic data released late in the Asian session underscored Beijing’s need to prop up its economy. China’s factory output rose 6.0 percent in July from a year earlier, falling short of forecasts. Fixed-asset investment and retail sales figures also missed expectations.

“Higher U.S. dollar gave an extra pressure on rubber and other commodities,” Yoshida said.

The rapid drop in the yuan dealt a body blow to appetite for risky assets globally, with equities, currencies and commodities coming under selling pressure.

MSCI‘s broadest index of Asia-Pacific shares outside Japan fell 2.1 percent to a two-year low. Japan’s Nikkei share average fell to two-week lows.

The most-active rubber contract on the Shanghai futures exchange for January delivery, however, rose 5 yuan to finish at 12,310 yuan ($1,927.81) per tonne.

The front-month rubber contract on Singapore’s SICOM exchange for September delivery last traded at 134.1 U.S. cents per kg, down 1.6 cent.

($1 = 124.4500 yen)
($1 = 6.3855 Chinese)

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