Tocom rubber falls three percent

Tokyo rubber futures tumbled nearly 3 percent to near a two-week low on Monday as a strengthening yen triggered heavy sales, but strong physical demand still supported prices. The benchmark rubber contract on the Tokyo Commodity Exchange for February delivery fell 7.0 yen, or 2.8 percent, to settle at 244.0 yen ($2.15) per kg.
It fell to an intra-day low of 243.3 yen, the lowest since August 29. Investment funds sold heavily as they wanted to lighten positions in commodities to avoid holding risky assets, reflecting a fall in Wall Street and the yen's sharp rise against the dollar.
Traders were also keen to take profit on TOCOM rubber futures after strong gains in the last two weeks. On Friday, the February contract peaked at 254.2 yen the highest for a benchmark since August 9. It had rallied about 9.3 percent since falling to an eight-month low of 232.5 yen on August 22.
The yen rose against higher-yielding currencies as on Friday's weak US payrolls data was expected to drive Asian stock markets down following a decline on Wall Street.
However, TOCOM rubber found some support in the afternoon session as demand for physical rubber still robust while the yen dropped slightly, dealers said. The yen was traded at 113.12/17 per dollar, slipping from around 112.96/98 yen in trade and still well below a 14-month low of 111.60 yen.
"The easing yen provided some support in the afternoon session, but we will have to keep an eye on the yen's movement for a couple of days as it dominates rubber futures," a dealer said.
The market's reaction to Friday's announcement that Japanese crude rubber stocks fell 5.7 percent to 9,819 tonnes by August 31 from August 20 was limited. The Rubber Trade Association of Japan said the latest figure was about 3 percent below 10,136 tonnes a year. In the physical market, rubber prices slipped in line with TOCOM.
Trading was likely to be busy as more inquiries were expected from tyre makers and dealers in Singapore who have been waiting to buy on dips, but prices should not fall sharply, traders said.
Fine weather in Thailand and Malaysia allowed farmers to tap rubber trees as usual, but supply was still limited, as traders had to build up stocks to prepare for the long Hair Rya festive season next month, marking the end of Ramazan, they said.