Japan rubber futures slide to two-month low on weak Chinese economic sentiment, stronger yen

SINGAPORE: Japanese rubber futures slid to a two-month low on Thursday, weighed down by weak economic sentiment in top consumer China and a stronger yen.

The Osaka Exchange (OSE) rubber contract for December delivery closed down 5.8 yen, or 1.81%, at 315.3 yen ($2.05) per kg.

The contract hit an intraday low of 312.8 yen, its weakest level since May 15.

The September rubber contract on the Shanghai Futures Exchange (SHFE) fell 265 yuan, or 1.83%, to 14,250 yuan ($1,966.87) per metric ton, its lowest since May 13.

Five major state-owned banks in China on Thursday cut deposit rates to cushion a hit to their already record low margins after this week’s surprise lowering of lending benchmarks to bolster stuttering economic growth.

China’s central bank surprised markets for a second time this week by conducting an unscheduled lending operation at steeply lower rates, as authorities sought to shore up the faltering economy with more monetary stimulus. China reported weaker-than-expected GDP data earlier this month.

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The yen on Thursday surged more than 1% against the dollar to peak at 152.23, its strongest level since early May, and scaled multi-month highs against other currencies ahead of next week’s Bank of Japan meeting, as yen carry trades unwound and risk appetite soured.

A stronger Japanese currency makes yen-denominated assets less affordable to overseas buyers.

Japan’s Nikkei share average ended at a three-month low and posted its biggest daily decline in three years on Thursday as the yen’s gain against major currencies hurt investor sentiment. It fell 3.28% to end at 37,969.51.

The front-month August rubber contract on the Singapore Exchange’s SICOM platform last traded at 159.5 U.S. cents per kg, down 1.5%.