Tokyo rubber futures dropped nearly one percent in a directionless market on Wednesday as a firmer Japanese yen spurred selling. The benchmark rubber contract on the Tokyo Commodity Exchange for November delivery settled at 282.8 yen ($2.32) per kg, down 2.8 yen, or 0.9 percent, from Tuesday's close.
TOCOM rubber, under pressure after failing to break resistance and the 14-day moving average at around 289 yen, fell as the dollar dipped from a four-month high against the yen.
There were selling orders near 122 yen in a bid to cash in profit, The dollar was traded at 121.46 yen. A stronger yen makes dollar-based commodities, such as rubber, cheaper for Japanese investors, encouraging them to sell yen-based TOCOM futures.
"It is clear that the upside is capped and there's no momentum to push prices much higher," a dealer said of TOCOM rubber. "The market is facing a correction and there is no clear direction whether it would go into an upward or downward trend," another said.
However, TOCOM prices are expected to move in a narrow range of 280-290 yen, as demand for rubber is likely to remain strong. On the physical front, rubber prices were mixed, with prices of most grades remaining firm despite the TOCOM fall.
Most producers were still asking for high prices because raw material remained expensive, traders said. Latex supplies in Thailand and Malaysia, the number one and number three producers, are improving as most farmers resume tapping after a bout of bad weather.
But prices of USS3, the raw material for export-grade rubber sheet, remained firm as less unsmoked sheet was available in the market, traders said. "Although latex output is rising, farmers need at least seven days to dry rubber sheet and that's why we cannot lower our prices," said a trader in Thailand's Hat Yai rubber centre.