Rubber declines to 3-month low on stronger Yen

BANGKOK: Rubber declined for a third day to the lowest level in three months after exports surged from Malaysia, the third-largest producer, and the Japanese currency strengthened, reducing the appeal of yen-based contracts.

The contract for delivery in August on the Tokyo Commodity Exchange fell 1.1 per cent to end at 277.6 yen a kilogram ($2,880 a tonne), the lowest settlement since December 14. Futures have lost 8.7 per cent in the past three days.

Rubber exports from Malaysia jumped 21 per cent to 68,300 tonne in January from a year earlier, while production gained 3.3 per cent to 87,960 tonne, according to the statistics department. Inventory surged 23 per cent to 188,100 tonne, it said. The yen traded at 95.75 from 96.13 on Wednesday. The lower house of Japan's parliament had voted on Thursday on central bank leadership nominees.

"Production is greater than demand, raising inventories," said Gu Jiong, an analyst at commodity broker Yutaka Shoji. "This puts pressure on the rubber market."

Inventories in China, the largest user, jumped to 107,481 tonne, the highest level in three years, based on a survey of nine warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the Shanghai Futures Exchange said on March 8. Stockpiles in Japanese warehouses rose 3.8 per cent to 11,363 tonne on February 28, the Rubber Trade Association of Japan said on March 11.

Strengthening Japanese currency also cut an appeal of the yen-denominated currency, while a slowdown in China car sales raised concerns demand may weaken, Chaiwat Muenmee, an analyst at DS Futures, said by phone from Bangkok.

The yen gained versus most major peers as an adviser to Japanese Prime Minister Shinzo Abe signaled a need to control inflation and as technical indicators suggested the currency's decline has been too rapid.

China's passenger car sales in February dropped 8.3 per cent on year to 1.11 million units, the China Association of Automobile Manufacturers said on March 11. Truck sales tumbled 28 per cent on year to 177,400 units, the group said.