Tokyo rubber futures ended around 1 percent lower on Thursday as a firmer yen triggered stop-loss selling, but falling supply and firm crude oil prices limited losses.
The benchmark rubber contract on the Tokyo Commodity Exchange for September delivery settled at 278.8 yen ($2.39) per kg, down 3.8 yen, or 1.3 percent, from Wednesday's close at 282.6 yen. The dollar suffered its biggest slide against the yen in two weeks on Wednesday after Federal Reserve Chairman Ben Bernanke suggested a slowing housing market had clouded the US economic outlook.
A stronger yen makes dollar-based commodities such as rubber cheaper for Japanese investors, encouraging them to sell yen-based TOCOM futures to stop further losses. However, a seasonal decline in supply with Thailand, the world's top producer, and Malaysia, the third, in the dry season, still supported prices, dealers said.
The wintering dry season, when latex output falls, in the two countries is expected to last until the end of April. US crude oil eased slightly on Thursday, a day after striking six-month highs as increasing political tensions between the West and Iran, the world's fourth largest oil producer, stoked supply concerns.
Rubber prices often benefit from high crude oil prices because investors believe expensive oil will encourage a shift to natural rubber from synthetic rubber, a petroleum product. TOCOM prices were likely to trade in a 270-285 yen range, dealers said. "It is not good that prices could not break 285 after several times of trying.
There could be a technical correction," one said. "But prices can't fall sharply as falling supply still supports them." In the physical rubber market, prices were mostly lower in line with TOCOM prices. Trade was not busy, although some users bought Thai RSS3 at $2.30 per kg. The Chinese, the world's biggest rubber buyers, were buying Indonesian SIR20 at 94-95 US cents per pound, or around $2.07 per kg, which was lower than offers from Thailand and Malaysia, traders said. However, physical prices were expected to be buoyant over the next few weeks during the wintering season in Thailand and Malaysia.