Tokyo rubber futures rose more than 1 percent to close under 140 yen on Monday, supported by a recovery in oil prices and a softer yen. Rubber has struggled to make gains since January as falling demand and fears of producer intervention to support prices lead traders to move cautiously. It hit a near two-month high of 156.3 yen per kg on January 7.
Sentiment was further weakened on Friday when traders said at least three major tyre makers had cancelled long-term contracts to buy Indonesian rubber as the global economic downturn slashes auto demand. "There are delays or cancellations of contracts by major suppliers and buyers," said a trader in Singapore. "The impact on the market is quite significant." The key Tokyo Commodity Exchange rubber contract for August delivery closed at 137.5 yen, up 1.5 yen or 1.1 percent from Friday, after moving between 135.8 yen and 139.6 yen.
Concerns about weak demand have capped rubber futures prices, with gains mostly linked to a recovery in oil prices or a fall in the yen, which inflates yen-based futures prices. A Chinese government think tank said China's economy is forecast to expand 6.5 percent in the first quarter from a year earlier.
Japan's crude rubber inventories totalled 11,279 tonnes as of February 20, up 9.5 percent from February 10, when the previous survey was taken, industry data showed on Monday. Oil rose over 1 percent and topped $46 a barrel on Monday, extending the previous session's gains, as investors bank on expectations that Opec will cut output again at this month's meeting.
The yen fell broadly on Monday as more grim economic data intensified worries about the severity of Japan's recession, while equity market falls caused the euro to dip against the dollar. Japan's Nikkei average fell 1.2 percent on Monday to a 26-year closing low, weighed down by a slide in other Asian bourses and automaker losses amid concerns about the fate of General Motors.