Tokyo rubber futures surged to a near six-week high on Tuesday supported by a weaker yen, but gains were capped by profit taking. The benchmark rubber contract on the Tokyo Commodity Exchange for January delivery rose 1.1 yen per kg, or 0.4 percent, to settle at 263.9 yen ($2.22) per kg.
The benchmark rose to the intra-day high at 267.5 yen, the highest since June 20, before profit taking set in. "Profit taking emerged when prices rose above 265 yen, the key resistance," one dealer said.
The yen fell on Tuesday as a rise in US stocks eased fears about deteriorating credit markets, helping to halt risk aversion that had led to the unwinding of carry trades and supported the Japanese currency. The dollar rose 0.8 percent to 119.14 yen, off a 3-1/2-month low of 118.02 yen struck last week on electronic trading platform EBS.
The dollar was at 119.06/09 yen. A lower yen effectively raises the value of yen-based commodity prices, including rubber. Oil prices, which stayed above $75 a barrel on Tuesday also, provided support as higher crude encourages the use of natural rubber instead of petrochemical-based synthetic rubber.
US crude was at $76.65 a barrel, while London Brent was at $75.57 a barrel. In the physical market, rubber rose in line with the rise in TOCOM. Trading revived as Thailand, the world's biggest producer, reopened after a holiday. Chinese buyers were in the market, seeking Thai RSS3 for prompt shipment as Indonesia could not supply due to limited stocks, traders said.
But most tyre-makers and European buyers stayed on the sidelines waiting to buy when prices soften, they said. Physical prices are expected to remain firm this week due to falling supply as monsoon rains hit major producing countries Thailand, Indonesia and Malaysia, disrupting tapping.
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