July 27 (Bloomberg) -- Rubber dropped, retreating from the highest price in two weeks, on a strengthening Japanese currency and the prospect of increased output from Thailand, the largest exporter of the commodity used to make tires and gloves.
Futures fell as much as 1.4 percent, the first decline in three days. The yen rose on speculation that exporters will buy the currency before Japan’s Obon, when Japanese take time off during the second week of August.
“The yen retains a strengthening tone and that has soured market sentiment, dragging rubber lower,” Varut Rungkhum, an analyst at commodity broker Agro Wealth Ltd., said from Bangkok.
December-delivery rubber fell to 262.2 yen per kilogram ($3,016 a metric ton) on the Tokyo Commodity Exchange, before settling at 263.5 yen. The contract touched 267.9 yen yesterday, the highest level since July 12.
“Exporters may purchase the yen ahead of the summer holidays,” said Yuji Saito, director of the foreign-exchange department at Credit Agricole Corporate and Investment Bank in Tokyo. The currency rose to 86.83 per dollar from 86.88 yesterday, making the yen-denominated rubber contract less attractive for holders of other currencies.
“Rainfall in southern Thailand paved way for farmers to start tapping, increasing supply,” said Navarat Kaewpratarn, a senior marketing official at Future Agri Trade Co. “This also put pressure on the market.”
Japan won’t extend a subsidy program for buyers of fuel- efficient models, Nikkei Telecom 21 reported on July 23, citing Masayuki Naoshima, minister for economy, trade and industry. The program is scheduled to be terminated at the end of September.
“Some investors remain concerned car sales in Japan may decline once the government ends a subsidy program for eco- friendly cars,” said Agro Wealth’s Varut.
November-delivery rubber on the Shanghai Futures Exchange declined 0.6 percent to settle at 22,175 yuan ($3,272) a ton.
(Bloomberg.com)
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