Tokyo rubber futures jumped more than 2 percent on Tuesday, hitting the highest level in more than six weeks as weaker yen spurred buying. The benchmark rubber contract on the Tokyo Commodity Exchange for June delivery ended the morning session at 308.7 yen ($2.70) per kg, up 6.7 yen, or 2.2 percent, from Friday close.
The Tokyo market was closed on Monday for public holiday. It touched a high of 309.0 yen a kg, the highest for any benchmark since November 9. A weaker yen inflates yen-based commodity futures prices, often luring speculative buying in Tokyo rubber futures.
The dollar stayed near a seven-week high against the yen on Tuesday as a rise in US equities made some investors less pessimistic about subprime-related problems and encouraged them to go back into carry trades, in which they borrow in low-yielding Japanese yen to invest in riskier assets promising higher returns.
At 0305 GMT, the dollar traded at 113.97 yen, near a peak of 114.49 yen hit on Monday that was the highest since November 7. Rubber markets in Indonesia, Malaysia, and Singapore are closed on Tuesday for Christmas Day holiday.
A Reuters poll released on Friday showed the Tokyo market was expected to remain firm until the end of this year on Chinese buying, concerns about falling supply and a bullish technical trend, but to dip a little in January.
The benchmark TOCOM contract was forecast to rise 9.5 percent to 300 yen by the end of December from 273.9 yen at the end of November, according to the median forecast of 10 analysts and dealers polled by Reuters.
But, some pessimistic dealers expected TOCOM prices to face a correction before rising to this year's high of 312.2 yen set on November 7. "There might be a round of profit-taking somewhere around 300-312 yen," one dealer said. In the physical market, rubber prices rose in line with TOCOM.
But physical trade was likely to remain sluggish this week with most buyers off for the Christmas and New Year holidays, traders said. "Only a few Chinese buyers were in the market this morning, but they bid at very low prices which no one could commit to," a trader at Thailand Hat Yai rubber centre said.
Rain had stopped and floods receded in Thailand's far south, but the price of USS3, the raw material for export-grade rubber sheet, remained high due to TOCOM, traders said. However, the price of USS was expected to fall in January as supply should get back to normal, traders said.