Tokyo rubber futures rose on Monday as trading firms covered short hedging positions after seeing prices fall by more than 10 percent last week, but the momentum was limited by a weaker dollar versus the yen.
Last week, the Tokyo market slid to its lowest levels in more than five weeks mainly on fund selling to seek safer assets against the backdrop of a fall in the dollar and stocks.
The key rubber futures contract on the Tokyo Commodity Exchange for April 2008 delivery ended the session at 274.2 yen per kg, up 1.2 yen or 0.4 percent from the previous close. The exchange widened a daily limit to 8 yen, effective on Monday, from 7 yen previously. On Friday, the market challenged a technical support of a 200-day moving average of 271.3 yen.
It cleared that level and fell as low as 266.8 yen the lowest for any benchmark contract since October 10. "A worsening chart outlook is negative for the market as fund managers often take a trading clue from charts," said Hitoshi Inagawa, senior manager at Japanese brokerage Yutaka Shoji Co.
"It could test 260 yen and then 245 yen if the downtrend persists. Fresh buy orders are not flowing in yet," he said. The dollar was down 0.3 percent at 110.70 yen as investors remained cautious about picking up the US currency, given concerns about the credit market and the US economy.
But the US currency stayed well above an 18-month low of 109.12 yen struck last week. Crude oil held onto gains and hovered slightly below $95 a barrel after comments from Opec members at a weekend summit that oil prices were undervalued due to a weak dollar.
A Reuters poll, released late on Friday, showed that respondents expected the benchmark distant TOCOM rubber contract to trade at 292.5 yen on average by the end of November, down about 1 percent from 295.7 yen at the end of October. It was forecast to slide further to 280.0 yen by the end of December, according to the poll.
In the physical market, prices were mostly firmer, supported by recovery in TOCOM prices. Physical supply is expected to increase this week due to improving weather in Thailand, the world's biggest rubber producer, said a trader in the country's Hat Yai rubber hub.