Tokyo rubber futures slipped a little on Thursday, reversing early gains as oil prices were off their record high and the yen strengthened. The benchmark rubber contract on the Tokyo Commodity Exchange for August delivery fell 0.5 yen to 305.1 yen ($2.94) per kg.
TOCOM prices slipped in the afternoon session as investors liquidated contracts in a bid to stop losses after oil prices fell from a record $104.95 a barrel and the rising yen added pressure, dealers said. The dollar weakened to 103.35 per dollar by 0842 GMT from around 103.80 in early trade. A stronger yen makes the dollar-based rubber commodity cheaper and usually induces selling of TOCOM rubber contracts.
However, the contracts were expected to remain firm during March due to falling supply in the wintering dry season in top producers such as Thailand when farmers stop tapping and strong oil prices provided support. On the physical front, rubber prices remained firm despite weaker TOCOM prices.
Trade was active with buyers seeking several grades of rubber before prices rose much higher after the oil price surge suggested rubber would follow in its wake, traders said.
"Not only tyremakers, but also dealers were buying. I think some of them had to cover their positions on the futures market while some of them need to fill their stocks," a Malaysian trader said. Malaysian SMR20 was traded at $2.72 per kg while SIR 20 was sold at $1.24 per lb for April shipment, he said. Physical prices were expected to remain firm over the next few weeks due to falling supply in major producing countries, trader said.