TOCOM rubber climbs to 3-week high on short-covering

TOKYO (Aug 8): Benchmark Tokyo rubber futures climbed for a third straight day on Wednesday, hitting a near-3-week high, aided by recent gains in oil prices and as investors covered short positions ahead of Japan’s ‘bon’ holidays next week, dealers said.

Oil prices held steady on Wednesday, after a rally the previous day, supported by a report of rising US crude inventories as well as the introduction of sanctions against Iran.

“A recovery in prices of oil and other commodities was behind the recent gain in rubber,” said Toshitaka Tazawa, an analyst at commodities broker Fujitomi Co.

“Also, many investors who plan to be away for the ‘bon’ holidays next week were unwinding their short positions,” he said.

The Tokyo Commodity Exchange (TOCOM) rubber contract for January delivery finished 2.6 yen, or 1.5%, higher at 174.0 yen (US$1.57) per kg, after touching the highest since July 19 at 174.5 yen earlier in the session.

TOCOM futures, which set the tone for rubber prices in Southeast Asia, were also lifted by an extended rally in Shanghai futures, dealers said.

The most-active rubber contract on the Shanghai Futures Exchange for January delivery rose 165 yuan to finish at 12,500 yuan (US$1,830) per tonne. It touched the highest since mid-March earlier in the session.

“But I expect TOCOM’s gain will be capped at around 175 yen as investors are worried about Sino-US trade conflicts and the possible imposition of higher import tariffs by Washington on Japanese cars,” Tazawa said.

Tokyo is seeking ways to counter US pressure for a bilateral free trade agreement and head off a rise in tariffs on its auto exports when Economy Minister Toshimitsu Motegi meets US Trade Representative Robert Lighthizer in Washington on Aug 9.

“Investors are closely watching what the US administration will say about import tariffs on autos which would affect demand for cars and tyres,” Tazawa said.

The front-month rubber contract on Singapore’s SICOM exchange for September delivery last traded at 134.6 US cents per kg, up 0.4 cent.

(US$1 = 6.8301 Chinese yuan)
(US$1 = 110.9400 yen)