RUBBER-Tokyo futures hit 8-month high on weaker yen

Benchmark Tokyo rubber futures rose 1.8 percent on their first trading day of the year on Friday, marking a sixth straight session of gains, with funds continuing to build positions on the yen's decline to its lowest since July 2010 against the dollar.

The yen had fallen to a 29-month trough of 87.95 to the dollar by Friday evening on expectations 2013 will bring more monetary stimulus from the Bank of Japan. On Dec. 28, the last trading day of TOCOM futures in 2012, the yen had been hovering around 86.64 to the dollar.

The benchmark rubber contract on the Tokyo Commodity Exchange (TOCOM) for June delivery rose 5.3 yen to settle at 307.8 yen ($3.54) per kg.

The contract had marked 312.4 yen at the open on Friday, the highest benchmark price since 316.0 yen hit on May 7, 2012, but it came under pressure from profit-taking, brokers said.

"Of course the weak yen is providing support," said a Tokyo-based broker.

"The market has definitely entered an upward trend, and it's not an environment for selling as funds have continued to build up positions. Today, some players were estimated to have unwound short positions to settle their losses."

A weaker yen makes dollar-based commodities more expensive and can encourage market participants to take speculative buying positions in TOCOM rubber. Theoretically, a 1 yen decline in the yen against the dollar pushes up Tokyo rubber prices by 2.5 yen to 3.0 yen per kg, brokers have said.

Global benchmark Tokyo rubber futures could extend the current rally next week after the decline in the yen spurred buying from speculators, with some dealers projecting it to trade between 300 and 320 yen in the short term.

It ended 2012 with a 15 percent gain on a weaker yen, higher stock markets and speculation over buying by China before the Lunar new year holiday next month.

The most-active rubber contract on the Shanghai futures exchange for May delivery fell 65 yuan to finish at 26,350 yuan ($4,200) per tonne.

The front-month rubber contract on Singapore's SICOM exchange for February delivery last traded at 303.50 U.S. cents per kg, down 3.9 cents. ($1 = 86.8400 Japanese yen) ($1 = 6.2303 Chinese yuan) (Reporting by Osamu Tsukimori; Editing by Joseph Radford)