Tokyo rubber futures rose 1 percent on Monday as a weakening yen helped bolster buying at levels near an eight-month low. But trade was subdued as concerns that the US supreme mortgage fallout could have a mid- to long-term impact on other financial markets kept investors at bay.
The benchmark Tokyo Commodity Exchange rubber contract for January delivery ended the session at 238.6 yen a kg, up 2.4 yen or 1 percent from Friday's close. The contract last week fell to 232.5 yen, the lowest intrude for any benchmark since December 22.
While firmness in physical rubber prices remains supportive to the TOCOM market, investment funds, wary about repercussions from the disarray in credit markets, have reduced their positions in the past weeks. "There's a concern that the supreme mortgage issue may linger for a longer time than previously thought and spill over into commodities again," said a trader at a Japanese brokerage firm.
The nearby August TOCOM contract expired at 236.0 yen, up 0.3 yen from the previous close and not far from the contract's life low of 229.2 yen marked two weeks ago. The yen came under pressure on Monday as stocks extended their recovery and whetted investor appetite for riskier bets, including those that use the low-yielding Japanese currency to buy assets in higher-yielding ones.
Stock markets have regained their composure following a frantic sell-off this month, when turmoil in the US supreme mortgage market dried up liquidity in global credit markets, slashing demand for riskier investments like stocks, corporate bonds, high-yielding currencies and commodities. The dollar traded around 116.15 yen on Monday, pulling further away from a 14-month low of 111.60 yen just over a week ago.
Physical rubber prices were little changed, despite gains in TOCOM futures contracts. Trading was thin, with some buyers lowering their purchasing levels, traders said. "Trade was quiet last week, and it was the same this morning," said a trader in Thailand's Hat Yai rubber hub.
Indonesia's SIR20 grade rubber stayed in discount to other major rubber types, but the spread was narrower than usual as the dry wintering season, when latex output falls, was approaching in its producing areas. A Tokyo-based trader said the dry season had yet to disrupt supply.
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