SINGAPORE: Japanese rubber futures rose for the fifth consecutive session to hit a three-week high on Thursday, led by the prospect of potential supply shortages, though the stronger yen capped gains.

The Osaka Exchange (OSE) rubber contract for June delivery was up 2.4 yen, or 1%, at 253.5 yen ($1.80) per kg at closing.

The rubber contract on the Shanghai Futures Exchange (SHFE) for May delivery was up 35 yuan, or 0.3%, at 13,905 yuan ($1,956.69) per metric ton.

On supply, several provinces in southern Thailand were hit by severe flooding on Monday after days of heavy rain, Thai local media reported, potentially affecting the supply of natural rubber.

The Japanese yen strengthened 0.52% to 141.09 per dollar, inching closer to a five-month peak of 140.95 it touched earlier this month.

The Asian currency is up 4% against the dollar in December, heading for its second straight month of gains on increased expectations that the Bank of Japan may soon move away from its ultra-loose monetary policy. Japan’s factory output declined in November, weighed by falls in auto production and clouding the outlook for the export-reliant economy.

Japan’s benchmark Nikkei average closed 0.42% lower, snapping a four-session winning run, as investors sold stocks after sharp gains in the previous session, while a stronger yen against the US dollar also weighed on market sentiment.

The front-month rubber contract on Singapore Exchange’s SICOM platform for January delivery hit a one-and-a-half-year high and last traded 9.9% higher at 164.2 US cents per kg, recording its best day in close to three years.

“The upward trend in prices on the Singapore exchange is caused by Indonesia’s delayed end consumer transactions, prompting heightened market activity,” said a Singapore-based trader.