Tokyo rubber futures fell as much as 2 percent on Monday after a decline in crude oil prices and a firm yen sparked selling from investors. The most-active rubber contract on the Tokyo Commodity Exchange for January 2008 delivery ended the session down 3.5 yen per kg at 259.5 yen, after falling 2.1 percent to an intrude low of 257.5 yen.
The contract has dropped almost 4 percent from the five-week high of 267.5 yen hit last week. "It looks the market is struggling. Selling pressure is very strong and the weather has improved after days of heavy rains. We'll see more supply in Thailand and Malaysia this week or next week," said a dealer in the southern city of Hat Yai.
"The physical front is a bit slow. China was in the market two weeks ago but they refused to chase the market last week because the price went up," said the dealer, referring to the world's largest consumer.
Oil prices fell over 1 percent to about $74 a barrel on Monday, extending the previous session's decline, which saw prices dragged down by poor US economic data.
A rise in oil prices is often positive for rubber, as investors believe expensive oil will encourage a shift to natural rubber from synthetic rubber, a petroleum product.
A firmer yen against the dollar makes yen-denominated commodities cheaper in the dollar-billed export market, which normally leads to lower TOCOM prices. In industry news, crude rubber stocks held at Japanese warehouses fell to 12,108 tonnes by July 20, down 11 percent from 13,650 tonnes in July 10, the Rubber Trade Association of Japan said on Friday. It was the lowest level since December 20.