Tokyo rubber futures extended gains to a fresh three-month high in active trade on Tuesday, drawing strength from the yen's sharp losses against the dollar. The July rubber contract on the Tokyo Commodity Exchange rose as high as 142.4 yen per kg, the priciest for TOCOM's benchmark rubber since October 27. At the close, the July contract was up 3.0 yen at 142.0, with other months gaining 1.5 to 2.4 yen.
"Investor buying gathered pace as a weaker yen added to a bullish sentiment stemming from the technical improvement of the market," a Tokyo broker said.
Stop-loss buying also emerged as the futures contracts for delivery from May to July 2005 hit a lifetime high.
The benchmark contract is poised to test the October high of 147.9 yen in the short-term, the broker said, adding that a breakthrough of that point would signal an end to the market's long-term downtrend since last March.
The benchmark contract has regained about 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.
The dollar rose to 105.29 yen on Tuesday, the highest since December 15, buoyed by apparent efforts by the United States to tighten fiscal policy and optimism from Federal Reserve Chairman Alan Greenspan regarding the US deficits.
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 arrived in southern Thailand, traders said.
In the wintering season, which usually runs through early May, rubber trees shed leaves and latex output declines, on average by 30 percent.
Turnover of TOCOM rubber was 26,503 lots on Tuesday, more than double Monday's 11,254 lots.
Open interest stood at 40,629 lots at the end of Monday trade, down from Friday's 41,671 lots.
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