Tokyo rubber futures slipped on Thursday as the stronger yen weighed on prices, but an agreement by top rubber producers to cut exports and a plan by Thailand's new government to shore up producer prices lent support. The benchmark rubber contract on the Tokyo Commodity Exchange for May delivery fell 1.8 yen per kg, or 1.5 percent, to settle at 120.3 yen ($1.37) per kg.
The benchmark fell as low as 114.8 yen per kg before stop-loss selling set in. "The market was oversold and should have a technical rebound after the producing countries sent signals that prices were too low," a Japanese dealer said.
The dollar stood little changed at 87.80 yen, after dropping as low as 87.13 yen, the lowest since mid-1995. There was caution in the market that the Japanese authorities might intervene to rein in the yen's strength. A stronger yen deflates the value of Tokyo-listed futures, encouraging investors to sell to adjust their positions.
The rubber market also came under pressure from a drop in oil prices, which underlined views on weak global demand. Rubber's fate has been closely tied to that of the auto industry as the commodity's main use is the production of tyres. US President George W. Bush said on Wednesday a decision on bailing out the teetering US auto industry needed to be made "relatively soon" and that he was looking at all options.
Tyre production in Japan is expected to fall 5 percent next year in terms of rubber usage, the Japan Automobile Tyre Manufacturers Association (JATMA) said on Wednesday. US crude futures steadied around $40 a barrel on Thursday, near its lowest in more than four years, as further evidence of slowing demand trumped Opec's biggest-ever production cut.
The rubber market was expected to get some support from news the Thai government planned to intervene on domestic prices to support farmers, dealers said. TOCOM prices were also aided by an agreement of the world's top three rubber producers - Thailand, Indonesia and Malaysia - to cut exports by 915,000 tonnes in 2009, dealers said.