Rubber Retreats as Falling Crude Oil Prices, Strengthening Yen Cut Appeal

Rubber dropped as a decline in crude oil prices and a strengthening Japanese currency reduced the appeal of the commodity used to make tires.

January-delivery rubber in Tokyo fell as much as 1.2 percent to 278.6 yen a kilogram ($3,263 a metric ton) before trading at 281.8 yen at 11:45 a.m. local time. The contract dropped for a third day, the longest losing streak in a month.

The yen gained against all 16 major counterparts after reports today showed U.K. consumer confidence dropped for a third month and Japan’s machine orders rose less than forecast in June.

“A combination of a falling crude oil price and a stronger yen is pressuring the market, lowering rubber prices,” Varut Rungkhum, an analyst at Agro Wealth Ltd., said today by phone from Bangkok.

Oil dropped to a seven-day low yesterday as the U.S. Labor Department said the country’s economy lost momentum heading into the second year of the recovery from the worst recession since World War II. Crude oil for September delivery was unchanged at $80.25 a barrel after dropping as much as 0.6 percent on the New York Mercantile Exchange earlier.

Losses are likely to be limited as prices are supported by forecasts for growth in vehicle sales in China, said Varut.

Auto sales in China, the world’s biggest market, may rise to 16 million this year, a manufacturers’ group said, boosting its forecast from a previous estimate of 15 million. Vehicle sales will be higher than previously expected judging by deliveries in the first half of the year, Beijing-based Dong Yang, vice president of the China Association of Automobile Manufacturers, said in an interview yesterday.

January-delivery rubber in Shanghai gained 0.4 percent to 24,970 yuan ($3,687) a ton.

(bloomberg.com)