Japanese rubber futures soar on weaker yen, rising oil prices

SHANGHAI: Japanese rubber futures rose for the second session on Thursday, buoyed by a weaker yen and firmer oil prices, although gains were capped by subdued buying interest at elevated price levels.

The Osaka Exchange (OSE) rubber contract for August delivery was up 1.8 yen, or 0.48percent, at 376.8 yen (USD2.37) per kg.

The rubber contract on the Shanghai Futures Exchange (SHFE) for May delivery fell 10 yuan, or 0.06percent, to 17,075 yuan (USD2,482.99) per metric ton.

The most active April butadiene rubber contract on the SHFE rose 540 yuan, or 3.6percent, to 15,540 yuan per metric ton.

The yen fell to 159 against the dollar, hovering near its lowest levels since January on good importer demand, though warnings of an FX intervention by Tokyo limited further losses. A weaker Japanese currency makes yen-denominated assets more affordable to overseas buyers.

Oil prices jumped on Thursday as Iran stepped up attacks on oil and transport facilities across the Middle East, raising fears of a prolonged conflict and oil-flow disruptions through the Strait of Hormuz.

Natural rubber often takes direction from oil prices as it competes for market share with synthetic rubber, which is made from crude oil. Ivory Coast, which is slated to be the world’s second-biggest rubber producer, saw a 0.9percent year-on-year decline in rubber exports in January and February, a note from the Qingdao International Rubber Exchange said.

China’s wholesale auto sales tumbled 15percent in February. Lower sales could weigh on vehicle production and tire demand, limiting further upside in rubber prices.

High prices of natural rubber have also discouraged buying, as reflected in lower trading volumes across Osaka, Shanghai and Singapore natural rubber contracts, according to LSEG-compiled data.

The front-month rubber contract on Singapore Exchange’s SICOM platform for April delivery last traded at 198 US cents per kg, down 0.4percent as of 0700 GMT.