Rubber Climbs as Yen Drops, Stockpiles May Boost July Prices

By Aya Takada

July 20 (Bloomberg) -- Rubber increased as a weaker Japanese currency raised the appeal of yen-based contracts and data showed stockpiles monitored by the Tokyo Commodity Exchange dropped to the lowest level in at least nine years.

Futures in Tokyo climbed for a second day and gained as much as 0.8 percent after declining last week by 3.3 percent. The yen retreated from a seven-month high against the dollar on speculation that the central bank may weaken the currency.

Natural-rubber stockpiles monitored by the Tokyo exchange dropped by 29 percent to 1,341 metric tons as of July 10, data from the bourse showed. It was the lowest volume since at least 2001, exchange spokesman Seiki Ichimura said. Data before that year were unavailable, he said.

“As domestic stockpiles are at a very low level, short- position holders may have to buy back the nearby contract,” Takaki Shigemoto, an analyst at JSC Corp. in Tokyo, said today. Speculators with short, or sell, positions in the nearby contract must buy them back by the July 26 expiry date, unless they can deliver the raw material.

December-delivery rubber gained as much as 2.1 yen to 266 yen per kilogram ($3,059 a metric ton) before settling at 264.5 yen on the Tokyo Commodity Exchange. July-delivery rubber, which lost 3 percent today, surged by as much as 2.8 percent on July 16 amid speculation that the low stockpiles may make physical delivery difficult at the expiry.

“The market was supported by speculation that the nearby contract may surge before its expiry,” Shigemoto said today by phone. The July contract settled at 344.4 yen.

Gains Limited

Gains in futures were limited after U.S. home-builder confidence dropped more than forecast, renewing concern the economic recovery may falter.

The National Association of Home Builders/Wells Fargo confidence index dropped to 14 this month, the lowest level since April 2009, from 16 in June, data from the Washington- based group showed yesterday. Builders in the U.S. turned more pessimistic in July than forecast, a sign the expiration of a government tax credit will depress home construction.

The yen fell against all of its 16 major counterparts amid speculation recent gains will spur Japanese authorities to weaken the currency.

The Bank of Japan may take steps to ease monetary policy should the yen stay at about 85 per dollar, Dow Jones Newswires reported yesterday, citing people familiar with deliberations at the central bank.

November-delivery rubber on the Shanghai Futures Exchange gained 1.7 percent to 21,720 yuan ($3,205) a ton at 2:45 p.m. local time.

(bloomberg.com)