TOKYO (March 16): Benchmark Tokyo rubber futures rose on Wednesday, recovering from a fresh two-week low hit in overnight trade, as a bounce in oil prices fed appetite for risk while the yen’s fall also lent support, dealers said.
The Tokyo Commodity Exchange (TOCOM) rubber contract for August delivery <0#2JRU:> finished 2.8 yen, or 1.7%, higher at 170.5 yen (US$1.50) per kg.
It dove to a low of 166.1 yen, the lowest since March 4, in Tuesday’s overnight trade which is accounted as Wednesday’s trade.
“Investors bought back their short positions as risk appetite increased after oil prices rebounded,” said Jiong Gu, analyst at Yutaka Shoji Co, citing oil leads trend in global commodity markets.
Oil prices rose on Wednesday after falling the previous session on expectations US output will decline further as some producers are under increasing financial distress and as early inventory data showed a less-than-expected increase.
The dollar fetched 113.14 yen, up 0.2% on the day, as markets waited for fresh guidance from the Federal Reserve. A weaker yen makes yen-denominated assets more affordable when purchased in other currencies.
No policy action is expected from the Fed, but the market will be hyper-sensitive to any guidance on when it might deliver its next hike in interest rates. Any signal that there is more than one hike in store this year will be positive for the greenback.
“I think the TOCOM rubber has bottomed out and will head toward 190 yen due to the wintering season in Southeast Asia and export cuts by top Asian producers,” Gu 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.
Asia’s top rubber producers are cutting exports by 615,000 tonnes for six months from March in an effort to lift prices that have tumbled amid excess supply to their lowest since the global financial crisis.
The most-active rubber contract on the Shanghai futures exchange for May delivery was up 135 yuan to finish at 11,270 yuan (US$1,728.26) per tonne.
The front-month rubber contract on Singapore’s SICOM exchange for April delivery last traded at 123.2 US cents per kg, up 0.2 US cent.
(US$1 = 113.6500 yen)
(US$1 = 6.5210 Chinese yuan renminbi)
