Tokyo rubber futures slip

Tokyo rubber futures slipped from a five-month high on Tuesday, weighed down by a 4 percent drop in oil prices and growing investor caution as prices approached the key 180 yen. Rubber futures have been supported by buying from funds on improved technical charts, the yen's weakness against the dollar and a rise in oil prices, as well as generally firm physical rubber prices.
The key Tokyo Commodity Exchange rubber contract for September delivery ended the morning down 4.7 yen or 2.6 percent at 173.5 yen per kg. Futures touched a five-month high of 179.7 yen on Monday. "Compared to a generally solid and stable physical market, the futures market has been volatile and is due for a correction as current high prices will likely prompt investors to close their position for now," said a trader at a Japanese broker.
The trader said the market could test near-term support at 168 yen but was expected to find a floor around 164 yen. The dry wintering season, when latex output falls, and demand from China, the world's largest buyer, have supported physical prices, traders said. Wintering normally runs from late January until April in Thailand, the world's top rubber producer.
The Japanese trader said it was unclear whether the violence in Bangkok would disrupt shipments or deals and affect market prices. A stand-off continued on Tuesday between Thai troops and thousands of anti-government protesters, after a day of violence in which two people died.
Oil prices slipped below $50 a barrel on Tuesday, extending their losses from the previous day when oil fell more than 4 percent after the International Energy Agency cut its forecast for oil demand, offsetting the impact of data showing Chinese crude imports rose to their second-highest level ever. The yen gained broadly on Tuesday as investor appetite for risk was put on hold following a slide in stock prices. The Nikkei fell 1.27 percent.
Global natural rubber output will fall 2.2 percent to 8.9 million tonnes in 2009, its biggest drop in 16 years, as Thailand, Indonesia and Malaysia produce less, the Association of Natural Rubber Producing Countries said on Monday. The Thai government called a holiday for Friday due to the political unrest in the country, while financial markets in Singapore and Indonesia were closed that day for Easter. Markets in Thailand will be closed April 13-15 for the Songkran Festival.