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TOCOM rubber edges lower amid oversupply concerns

TOKYO, June 8 (Reuters) – Benchmark Tokyo rubber futures dropped for a second day on Wednesday, weighed down by weak economic data from top buyer China and concerns over increasing supply from Southeast Asia, though higher oil capped losses, dealers said. The Tokyo Commodity Exchange (TOCOM) rubber contract for November delivery JRUc6 0#2JRU: finished down 0.7 yen, or 0.4 percent, at 156.3 yen ($1.46) per kg. The TOCOM futures, which set the tone for tyre rubber prices in Southeast Asia, earlier hit a low of 155.3 yen, near Monday’s bottom of 155.0 yen which marked a 10-day low. “Slack economic data from China dampened market sentiment while seasonal pressure was also rising as Southeast Asian producers apparently started to increase output after the wintering season,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

China’s exports fell more than expected in May as global demand remained stubbornly weak. Rubber is tapped year-round, but latex output drops during the dry wintering season, when trees shed leaves.

Wintering in Thailand, Malaysia and Indonesia lasts from around February to May. “Still, losses were cushioned by firmer oil,” Kikukawa said.

Oil prices rose for a third day to hit their highest in about eight months on Wednesday, boosted by industry data showing a larger-than-expected drawdown in U.S.crude inventories, worries about attacks on Nigeria’s oil industry and strong Chinese demand for oil.

“I expect the TOCOM to head lower, especially if the yen moves higher than 105 yen against the dollar,” Kikukawa said. The U.S. dollar slipped 0.3 percent to 107.05 yen JPY= on Wednesday, after hitting a session low of 106.72 earlier. It remained off the one-month low of 106.35 touched on Monday but was still a long way away from levels above 111 yen at the end of May. 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 September delivery SNRcv1 fell 170 yuan to finish at 10,455 yuan ($1,591.20) per tonne. China’s markets will be closed on Thursday and Friday for the Dragon Boat festival holiday.

The front-month rubber contract on Singapore’s SICOM exchange for July delivery STFc1 last traded at 126.5 U.S. cents per kg, down 1.4 cent.

($1 = 107.0600 yen)
($1 = 6.5705 Chinese yuan)

(Reporting by Yuka Obayashi; Editing by Sunil Nair)

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