Key Tokyo rubber futures rose more than 2 percent on Wednesday, supported by a recovery in oil and share prices on assurances by Federal Reserve Chairman Ben Bernanke that the troubled banking sector would be protected. A fall in the yen to a three-month low against the dollar on Wednesday also supported rubber prices as in theory it inflates yen-based futures prices.
The key Tokyo Commodity Exchange rubber contract for August delivery, which began trading on Tuesday, was up 3.2 yen or 2.4 percent at 137.2 yen per kg. It hit a one-week high of 140.7 yen earlier in the day. Concerns about weak demand pulled down the previous benchmark contract to a two-month low of 130.4 yen last week.
"Futures look supported by the currency and oil markets," said a trader in Singapore. Oil prices inched above $40, after rising 4 percent on Tuesday, tracking a bounce on Wall Street, while figures showing higher-than-expected compliance by the Organisation of Petroleum Exporting Countries to its agreed production cuts encouraged the gains The dollar hit a three-month high against the yen, keeping gains from Tuesday when it rose on safe-haven bids for the US currency after Bernanke warned that the US recession may drag into 2010 unless government efforts succeed in restoring financial stability.
President Barack Obama struck a balance between grim economic reality and a more hopeful outlook on Tuesday in giving reassurances that the country will emerge from crisis "stronger than before."
Tokyo's Nikkei share average gained 1.6 percent on Wednesday, after nearing a 26-year low the previous day, as Wall Street also rallied back from 12-year lows on Tuesday on Bernanke's assurances that he preferred to support banks without nationalising them.
Rubber demand is likely to slow in March, with recent big buyer China pulling back from the market, but prices may still rise because of the normal seasonal drop in supply, traders said on Tuesday. Asian physical rubber prices were a touch softer in quiet trade on Wednesday, but drawing support from the rise in Tokyo futures.
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