Tokyo rubber bounces

Tokyo rubber futures rebounded from a one-week low on Wednesday, as investors hunted for bargains on the view that the market's medium-term upturned remained intact. The market also drew strength from the yen's drop against the dollar after data showed that Japan's economy slipped into recession for much of 2004. The benchmark July rubber contract on the Tokyo Commodity Exchange finished up 2.6 yen per kg at 141.2, recovering from the day's low of 136.7 yen, which was the cheapest since February 7.
Other months were 0.2 to 2.7 yen higher at the close. "Bargain-hunting was active as prices came down to the level investors had aimed for," a Tokyo broker said. Buyers had waited for July rubber to fall below 137 yen in a correction to the latest rally to a four-month high, he said.
The July contract set a lifetime high of 146.9 yen on Monday, which was the priciest for TOCOM's benchmark rubber on a continuation basis since last October.
Short-covering was also prompted by the yen's retreat against the dollar after the government said Japan's real gross domestic product declined by 0.1 percent in October-December, marking a third straight quarter of contraction.
The dollar was around 105.10 yen, up from 104.40 yen late in New York. After confirming a floor at 136-137 yen, TOCOM's benchmark rubber contract is expected to test the October high of 147.9 yen, the broker said.
If the contract breaks that point, that would signal an end to the market's long-term downtrend since last March. TOCOM's benchmark rubber has regained half of the losses it sustained in a slide from last year's peak of 166.3 yen set in March to a bottom of 116.8 yen in November.
Buying of TOCOM rubber was also encouraged by a seasonal decrease in rubber supplies in Thailand the world's largest producer and exporter of natural rubber. Rubber supplies have started to decline as the "wintering" dry season has begun in southern Thailand.
In the wintering season, which usually runs through May, rubber trees shed leaves and latex output declines, on average by 30 percent. Turnover of TOCOM rubber were 30,359 lots on Wednesday, down from Tuesday's 35,808 lots. Open interest was 53,796 lots at the end of Tuesday trade, down from Monday's 54,878 lots.