TOKYO, Sept 29 (Reuters) – Tokyo rubber futures bounced back on Tuesday, paring a 3.2 yen fall the previous day as a recovery in the dollar towards 90 yen encouraged buying by short-term investors.
* The yen had hit an eight-month high of 88.23 per dollar on trading platform EBS on Monday. The Japanese currency retreated on Tuesday after Japan’s finance minister said intervention was possible in extreme cases. [USD/]
* A stronger yen deflates the value of yen-priced futures.
* “It’s the dollar/yen, not rubber’s fundamentals, that is providing investors cues for buying or selling,” said a manager at a Japanese commodity brokerage.
* The key Tokyo Commodity Exchange rubber contract for March delivery <0#JRU:> settled at 197.2 yen, up 2.8 yen or 1.4 percent from the previous day.
* Despite Tuesday’s rebound, the March contract looks vulnerable towards 190 yen, traders said, given uncertainty about demand particularly from China, the world’s largest rubber consumer, noting the rise in inventories there and the U.S. decision to curb imports of Chinese tyres.
* “There are few bullish factors in sight,” the manager said. “A lack of demand for South East Asia-made rubber is overshadowing the market.”
* But nearby contracts will likely be underpinned by falling inventories in Japan, limiting the downside for the key March contract to around 185 yen, the manager said.
* TOCOM’s benchmark, which is usually the most-distant contract, briefly fell below 190 yen to a six-week low in mid-September, but has held above it since then.
* Monday’s news that Malaysia, the world’s third-largest producer, had imposed a new levy, effective on Sept. 1, on imported rubber for re-export and compound rubber had little immediate impact on the market. [ID:nKL446225]
* The levy is aimed at protecting local rubber producers in Malaysia. But whether China, the main buyer of Malaysia’s compound rubber, will shift its choice to SMR20 or other pure tyre grades is not yet known, traders said.
* China recently disappeared from the physical rubber market as it turned to its own inventories. [ID:nSP462022] There are concerns that Chinese users may not return even after an eight-day National Day holiday starting on Thursday.
* Oil held steady around $67 per barrel on Tuesday after climbing more than 1 percent a day earlier amid strong equities markets and Iran’s missile tests, but gains were moderated by expected builds in U.S. fuel stocks. [O/R]
* Japan’s Nikkei share average <.N225> rose 0.9 percent on Tuesday, with exporters rebounding after the yen pulled back from an eight-month high against the dollar. [.T]

Source: Reuters

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