Benchmark Tokyo rubber futures jumped 6 percent on Friday, hitting a fresh 4-year high and a 15 percent weekly gain, as optimism over a stronger global economy, a weaker yen and supply fears after floods in Thailand prompted buying.
"We saw some panic buying," said a Tokyo-based dealer who declined to be named.
"While supply concerns in Thailand persisted, a record-setting Dow Jones Industrial Average raised investors' hopes for a stronger global economy," he said, adding thin trade in the absence of Chinese traders helped accelerate the rally.
Chinese markets were shut on Friday and will be closed until February 2 for the Lunar New Year. Overnight on Wall Street, all three major indexes hit life-time intraday highs, with the Dow Jones index also rising 0.2 percent to close at a record high after breaching the 20,000 level on Wednesday.
The Tokyo Commodity Exchange (TOCOM) rubber contract for July delivery finished 18.7 yen, or 6 percent, higher at 331.3 yen ($2.88) per kg. It rose for a fourth straight day and touched the highest since February 14, 2013 of 332.4 yen earlier in the session.
The TOCOM futures, which set the tone for tyre rubber prices in Southeast Asia, climbed 14.9 percent for the week, bringing gains so far this year to 26 percent. The US dollar perked up on Friday, rebounding from a seven-week low on optimism over the US economic outlook, with the dollar gaining 0.4 percent against the yen to 114.96 yen. A weaker yen makes yen-denominated assets more affordable when purchased in other currencies.
Thailand's rubber authority said last week that it would sell 98,000 tonnes of rubber from state stockpiles in the first state auction of the year after the world's biggest rubber producer and exporter suffered from flash floods in its southern provinces, the country's main rubber-growing region.
"It's hard to predict which direction the market will be headed next week. It could rise further as the TOCOM benchmark has broken many technical resistance lines, but it could also face corrections as it has soared so fast," the dealer said.
The front-month rubber contract on Singapore's SICOM exchange for February delivery last traded at 223.9 US cents per kg, up 3.0 cent.