Tokyo rubber futures fell further on Monday's session, tracking weak sentiment on gold and oil futures. The benchmark March 2007 contract fell 0.8 yen to 232.7 yen ($1.96) per kg, slightly lower than last on Friday's 233.5 yen.
"Gold and oil were lower and rubber also followed," said a Tokyo-based trader. Gold edged down on Monday as dealers watched the energy market for direction after a drop in crude oil sparked selling in New York.
Rubber trading volume was thin and dealers expected prices to drop further on short selling from speculators hoping to buy at cheaper prices, dealers said. "For rubber, I guess there were people who want to buy cheap," another dealer said.
However, dealers said they expected limited downside potential with short covering seen kicking in around 228 yen and falling supply from producers also offering support.
"If there are some strong factors appearing from physical side, I think market will go up further," said a Japanese dealer. Physical prices were barely changed in holiday-subdued trade. Rubber producers Thailand, Indonesia and Malaysia, whose combined production accounts for 60 percent of the world's natural rubber output, have holidays this week.
Indonesian markets are closed all week and Malaysia is holding national celebrations on Tuesday and Wednesday. Thai financial markets were closed on Monday. Physical prices were seen supported by limited supply as more rains that slowdown tapping expected in Thailand and Malaysia. In Thailand, the Meteorological Department said it expected scattered thundershowers on Monday and Tuesday over about 30 percent of the south, the country's main rubber producing region.
A Malaysian trader said rains, although not heavy, had affected production. "These few days we have more and more Thai producers coming onto the market, checking for prices and also trying to cover something from us," he said.