Oil Report

Tokyo rubber hits two-month high due to yen, oil

TOKYO, Oct 5 (Reuters) - Tokyo rubber futures hit a fresh two-month high on Friday as follow-through buying emerged to reflect the yen’s weakness against the dollar and firmness in other commodities such as oil and gold.

Tokyo Commodity Exchange rubber futures <0#JRU:> were supported by firm physical prices as concern over supplies grew due to rains in Thailand.

Speculators also bought TOCOM rubber after falls in Japanese warehouse inventories, although the market does not appear to be facing any supply tightness as tyre makers in Japan are believed to be holding plenty of their own stockpiles.

The key TOCOM rubber for March 2008 delivery rose to 266.9 yen per kg, the highest since July 31. It was up 2.2 yen or 0.8 percent from Thursday’s 264.7 yen.

The market was watching whether the contract would hold above the 200-day moving average of 265.9 yen until the close for the first time in nearly two months.

Speculative buying, mainly led by investment funds outside Japan, was expected to provide solid support for TOCOM rubber, but the market could be reluctant to take large positions ahead of a public holiday in Japan on Monday.

Rubber Trade Association of Japan data on Thursday showed that Japanese crude rubber stocks held at domestic warehouses sank to 8,404 tonnes by Sept. 20, the lowest since December 2005.

That was down 5.5 percent from 8,896 tonnes as of Sept. 10 and down 18 percent from a year earlier. [ID:nT211243]

TOCOM prices were expected to be supported as physical prices were likely to remain high next week due to rain on Thailand’s Andaman coast and in Malaysia, while Indonesia was still in the dry wintering season, when latex output falls.

Traders said TOCOM rubber received support as the yen dropped to around 116.50 JPY= against the dollar.

In addition, U.S. crude oil futures were above $81 a barrel on Friday, after rising for the first time in five sessions a day earlier on the back of fund buying.