Tokyo rubber futures advanced on Friday, supported by concerns about tight supply and robust demand from major tyre makers, but gains were limited by Japanese retail investors keen to sell on rallies.
Key most-distant December Tokyo Commodity Exchange rubber strengthened as much as 312.0 yen the highest since June 13. Strong physical rubber prices provided solid footing, with tyre makers seeking to buy nearby shipments.
Japanese trading houses were also detected buying TOCOM futures. But the topside was capped by sell orders from brokerage houses, which are taking sell positions on hopes prices will fall in the medium term when more supplies come onto the market.
"Prices remain strong, but they are really capped as there are plenty of retail players eager to sell on gains," said a senior analyst at a Japanese brokerage house. "Considering that there are many tyre makers trying to fill there nearby requirements, prices aren't expected to fall but the topside will be limited."
December TOCOM rubber closed at 309.4 yen per kg, up 0.7 yen or 0.23 percent from Thursday's settlement of 308.7 yen. The spot July contract ended up 0.9 yen at 322.9 yen. Investors were careful about taking new buy positions, while they were keener about selling on rallies, especially after experiencing the price plunge in mid-June.
On June 13, the key distant contract touched 324.5 yen, the highest for a benchmark since September 1980, before falling as far as 280.4 yen on July 16. But TOCOM rubber is bullish, fundamentally and technically.
The December contract is above the near-term trend lines of 306.0 yen, which is the seven-day moving average (MA), and the 14-day MA of 301.2 yen. Sentiment was also lifted after the key contract filled in a chart gap to 309.1 yen in the week.
"I'm not sure whether we are actually facing a severe shortage in physical supplies but there are views that the Japanese market is receiving smaller-than-expected shipments," said Hisaaki Tasaki, market analyst Ace Koeki Co Ltd.
Rubber also rose in line with other commodities, with the dollar down and share prices up after the Fed signalled it may soon pause in its two-year campaign of interest rate rises. As widely expected, the Fed raised overnight rates on Thursday to 5.25 percent for a 17th consecutive rate increase.
But it also left the door open for a pause by saying that moderating growth should cool inflation pressures. That news cheered Asian share prices, which spread into rubber and other commodities on the view that the global economy would stay bullish to boost demand for raw materials.
Thailand's benchmark RSS3 rubber sheet for August shipment was well-supported around $2.78 a kg free on board (FOB) from around $2.75 late on Thursday. Tyre-grade Standard Thai Rubber, or STR20 block, for August shipment rose to $2.55 a kg against around $2.51 on Thursday.
Malaysia's SMR20 also firmed to around $2.55 a kg FOB, compared with around $2.51 the previous day. Indonesia's SIR20 rose to around $2.40 a kg FOB, compared with $2.37 on Thursday. The most-active September Shanghai rubber contract closed up 985 yuan per tonne at 25,710 yuan.
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