Tokyo rubber hits nine-month high

Tokyo rubber futures surged by the daily price limit of 5.0 yen per kg on Wednesday to the highest level since last June, as stop-loss buying emerged after the market broke through resistance due to a weak yen. The September rubber contract on the Tokyo Commodity Exchange jumped by the daily limit in the late afternoon to 149.5 yen - the priciest for TOCOM's benchmark rubber since June 28. At the close it was up 4.5 yen at 149.0. Other months were 3.4 to 4.7 yen higher at the close.
"Short-position holders rushed to buy back as the market has finally got out of the range it had been trapped in since the middle of February," a Tokyo broker said.
A bullish technical sign may have also encouraged commodity funds to accumulate long positions in TOCOM rubber, he added.
TOCOM benchmark rubber has gained 10.7 yen or 7.7 percent from this month's low at 138.3 yen.
It is expected to test 154.8 yen in the short to medium term, the broker said.
After setting this year's high of 146.9 yen on February 14, TOCOM rubber went into a corrective phase, weighed down by the yen's strength against the dollar amid concerns over widening US trade and fiscal deficits.
But TOCOM has regained upward momentum as the yen lost ground against the dollar after the Federal Reserve warned last week that it may raise rates at a faster pace to counter inflationary pressures. The dollar touched a five-month high against the yen on Wednesday after the Japanese currency took a hit from disappointing February industrial output data. The dollar was at 107.22/25 yen at 0716 GMT after hitting 107.69 yen - the highest level since October 22.
TOCOM also drew strength from firmer physical rubber prices, as supplies are seasonally tight due to a dry weather in rubber-producing areas in south-east Asia.
In the "wintering" dry season, which usually runs through early May, rubber trees shed leaves and latex output declines, on average by 30 percent.
Turnover in TOCOM rubber was heavy at 36,180 lots on Wednesday, more than doubling Tuesday's 15,706 lots.
Open interest stood at 55,334 lots at the end of Tuesday trade, up from Monday's 54,234 lots.