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Saturday, August 14, 2010

Rubber Rallies for First Time in Five Days on Crude Oil Gain, Yen Decline

Rubber climbed for the first time in five days, trimming this week’s loss, as crude oil rallied and the yen dropped, boosting the appeal of the commodity used to make tires.

January-delivery rubber in Tokyo gained as much as 2.1 percent to 282 yen a kilogram ($3,275 a metric ton) on the Tokyo Commodity Exchange before closing at 280.8 yen. The contract lost 0.5 percent this week, the first weekly drop in four.

“It’s a technical rebound, backed by a weaker yen and a rally in oil prices,” Shuji Sugata, research manager at Mitsubishi Corp. Futures Ltd. in Tokyo, said today by phone. “Lower stockpiles have also lent support to the market.”

Crude oil rallied from a one-month low and traded at $76.68 a barrel in New York after falling as U.S. applications for unemployment benefits rose. Initial jobless claims in the U.S. rose by 2,000 to 484,000 last week, the highest level since February. Lower oil prices make natural rubber less attractive than rival synthetic products made from petroleum.

The yen fell for a second day after comments by Japanese officials stoked speculation they’ll act to curb the currency’s gains to protect the nation’s economic recovery. A stronger Japanese currency reduces the appetite for yen-based contracts.

The yen slipped to 86.06 per dollar at 4:06 p.m. in Tokyo from 85.90 in New York yesterday. It reached 84.73 on Aug. 11, the strongest since July 1995.

Natural rubber stockpiles in Japan expanded to 3,275 tons as of July 31 from a record low of 2,628 tons on July 20, according to data from the Rubber Trade Association of Japan.

“Even though stockpiles increased at the end of last month, it is still considered very low,” Sugata said. Inventories were at 7,288 tons at the end of January.

Natural rubber prices are likely to remain near current levels at $3 a kilogram for the next two months because of tight supply and increasing demand, according to the International Rubber Consortium Ltd.

January-delivery rubber in Shanghai rose 1.6 percent to 24,870 yuan ($3,662 a ton), the first gain in three days. The contract gained 0.7 percent this week.

source - http://www.bloomberg.com