SINGAPORE: Japanese rubber futures rose on Tuesday, lifted by a strong Nikkei performance and a weaker yen, although cautious trading ahead of upcoming U.S. inflation data capped gains.

The Osaka Exchange (OSE) rubber contract for July delivery was up 0.5 yen, or 0.18%, at 278.5 yen ($1.86) per kg, as of 0200 GMT.

The contract dropped 1.66% last week.

Japan’s benchmark Nikkei average opened 0.95% higher and rose 2% during the session, hitting its highest since February 1990.

The dollar flirted with the psychological threshold of 150 yen on Tuesday and held steady ahead of a key reading on the U.S. inflation due later in the day.

The yen has tumbled more than 5% against the dollar year-to-date.

A weaker yen lifted Japanese equities and boosted investor sentiment in the rubber market as it made yen-denominated assets more affordable for overseas buyers.

Japan rubber futures climb on weaker yen

Japanese wholesale prices rose 0.2% in the year to January, according to Bank of Japan data on Tuesday.

The U.S. January consumer price index report is due Tuesday, while the producer prices report is due later in the week. Investors are also eager to see Thursday’s U.S. retail sales report for January.

Tyre maker Michelin on Monday reported record results, but remained cautious for the new fiscal year, citing an “uncertain” market environment.

Chinese banks extended 4.92 trillion yuan ($684.01 billion) in new yuan loans in January, up sharply from December and beating analysts’ expectations as policymakers try to shore up the sputtering economy.

Mainland China’s financial markets were closed for the Lunar New Year holiday and will resume on Monday, Feb. 19, leading to a subdued trade in Asia.

The front-month rubber contract on Singapore Exchange’s SICOM platform for March delivery last traded at 152.20 U.S. cents per kg, up 0.33%.