Tokyo rubber futures bounced back on Friday ending a three-day bear run as a softer yen led to some short-covering in the absence of fresh incentives. Buying on dips, after the benchmark contract hit a seven-week low on Thursday, also helped boost the market. The benchmark June 2005 contract on the Tokyo Commodity Exchange (TOCOM) settled up 0.9 yen per kg at 122.6 yen, after moving between 121.5 yen and 123.0 yen. Other months rose by 0.7 yen to 1.0 yen.
"The fact that the benchmark contract recovered the key 120-yen level at Thursday's close led to buybacks but there were few traders buying aggressively," a Tokyo analyst said.
He said the market looked heavy around the 123-125 yen range. Resistance was pegged at 120 yen.
In the currency market, the dollar rose against the euro, building on overnight gains made after the European Central Bank reiterated that Asian currencies should be more flexible, taking pressure off the single currency to climb.
The dollar also strengthened against the yen. The dollar was at 102.94/3.01 yen, compared with 102.39/45 in late US trade.
The volume of TOCOM rubber traded on Friday was an estimated 7,702 lots, down sharply from Thursday's 17,717 lots. TOCOM introduced continuous computerised trading in rubber futures from this year to try to boost flagging liquidity and improve efficiency.Results have so far been patchy. While trading volume ballooned to heavy 18,633 lots on January 5, the day after the new system debuted, it has been below 10,000 lots on many other days, or at a similar volume as late last year.
The analyst said the heavy fluctuation in trading volume was one sign that funds were largely behind the current market moves. Traders have said more time is needed to judge whether the new system has improved liquidity.
Open interest stood at 39,035 lots as of the end of Thursday, versus 37,940 lots on Wednesday.