Tokyo rubber futures slipped to a near two-week low on Tuesday on a technical correction as players sold contracts after prices failed to break a key resistance of 300 yen. But TOCOM prices were expected to be supported by limited physical supply while demand remained strong, traders said.
The benchmark rubber contract on Tokyo Commodity Exchange for November delivery settled at 287.6 yen ($2.36) per kg, down 5.6 yen or 1.9 percent from Monday's close.
The benchmark fell as far as 286.3 yen, the lowest since May 17. "It's a round of technical correction and also profit taking," a dealer said. Dealers expected TOCOM prices to rebound, tracking a rise in oil prices. London Brent crude rebounded to around $70 a barrel due to nagging concerns about supply in Nigeria.
Higher oil prices usually benefit rubber prices as expensive oil encourages the use of natural rubber in place of synthetic rubber, a petrochemical product. TOCOM prices were expected to rebound after they found strong support around 280 yen, dealers said. Limited supply on the physical front also lent support to TOCOM prices, dealers said.
Most Asian physical rubber prices remained high despite a fall on TOCOM and trading was expected to revive this week, with the United States and Europe back from a holiday and Japanese and Chinese buyers in the market for STR20 and SIR20, traders said.
"Indonesia alone couldn't fill Chinese demand, so buyers shifted to buy STR20 from Thailand as their prices were probably the same," a trader said. Supply in the world's top three producers Thailand, Indonesia and Malaysia is still tight due to persistent rain disrupting tapping. "Physical prices should be supported at least for the whole week as demand is still strong while supply is limited," a Malaysian trader said.
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