RUBBER-Tokyo futures sink to near 3-week low, hit by yen

TOKYO May 18 (Reuters) - Tokyo rubber futures sank to an almost three-week low on Monday, hit by the yen's rise against the dollar, while investors unwound riskier assets as Tokyo stocks fell to their lowest close since May 1.

* The key Tokyo Commodity Exchange rubber contract for October delivery <0#JRU:> fell 4.5 yen or 2.8 percent to 159.0 yen per kg from Friday's settlement of 163.5 yen.

* It earlier fell as low as 156.4 yen, the lowest intraday level since April 28.

* A stronger yen deflates yen-based Tokyo futures prices.

* The dollar and yen rose on Friday as worries persisted about global economic prospects after more evidence of recession in Europe and the U.S. triggered stock losses across the globe, prompting investors to seek shelter in the yen in particular. [USD/]

* "Rubber's fundamentals haven't changed much," said a manager at a Japanese commodity brokerage.

"But external factors, like the yen and equities, are now all out of favour (for the rubber market)," the manager said, adding that a fall below the recent low hit on April 23 of 152.4 yen could worsen technical charts and trigger more selling.

* In the Shanghai rubber market, the most active September futures contract <0#SNR:> hit its daily limit-low at 14,555 yuan per tonne in early trade before paring the losses to 14,710 yuan, down 615 yuan from the previous close.

* Oil CLc1 steadied above $56 a barrel on Monday, pausing from the previous session's near 4 percent loss amid worries that a strong economic recovery that would boost oil demand was quite far off. The oil market now awaited further economic data and movements in equities markets for directions. [O/R]

* Tokyo's Nikkei share average .N225 fell 2.4 percent. [.T]

* In the physical market, rubber prices followed TOCOM and Shanghai futures prices lower.

* Chinese buyers were reluctant to buy physical rubber at the current level for the Thai STR20 grade of around $1.65 per kg, traders said.

* Japan's Bridgestone Corp (5108.T) was said to have bought some rubber cargoes last week, but other Japanese tyre makers kept adjusting their inventories and refrained from buying, a manager at a Japanese trading firm said.

"There's no action from Chinese buyers. But they are expected to enter the market when the price of STR20 grade falls to or below $1.50," the manager added.

* The world's top three rubber producers could revise down planned export cuts at a meeting in June because prices have risen along with demand, senior officials said last week.

* Toyota Motor Corp (7203.T) has received more than 80,000 pre-sale orders for the new Prius in Japan. [ID:nTFD003300]

* The Obama administration said on Friday it would stand behind General Motors Corp (GM.N) during the remainder of its restructuring. [ID:nN15280299]

* GM said it would drop about 1,600 U.S. dealers as it struggles to slash billions of dollars in operating costs and debt ahead of an anticipated bankruptcy filing by the end of the month. [ID:nN15384469] (Reporting by Chikako Mogi and Risa Maeda; Editing by Chris Gallagher)