TOCOM falls to 1-week low on yen's surge

Benchmark Tokyo rubber futures fell more than 2% to a one-week low on Thursday, as investors took profit from the recent rally after the yen's sharp rise against the U.S. dollar and a drop in Tokyo equities.

The Tokyo Commodity Exchange (TOCOM) rubber contract for May delivery <0#2JRU:> finished 4.1 yen, or 2.4%, lower at 168.5 yen (US$1.38) per kg. It hit a low of 167.8 yen, the lowest since Dec. 3, earlier in the day.

"TOCOM was hit by the yen's surge," said Toshitaka Tazawa, an analyst with Fujitomi Co.

"Plus, investors wanted to book profits after a relatively quick climb over the past few weeks," he said.

TOCOM futures, which set the tone for tyre rubber prices in Southeast Asia, have gained more than 10% since hitting a low of 153 yen on Nov 6.

The yen posted its biggest gain in more than three months on Wednesday, hitting a one-month high of 121.075 to the dollar. It last stood at 121.72 on Thursday.

A stronger yen makes yen-denominated assets less affordable when purchased in other currencies.

The Nikkei share average fell to a five-week closing low on Thursday as a sudden surge in the yen hit shares of exporters.

"There has been a strong ceiling at around 180 yen for the TOCOM benchmark. Whether or not it can break the level this time depends on the yen's move and investors' sentiment after the U.S. rate hike next week," Tazawa said.

The Federal Reserve is expected to raise interest rates next week.

The most-active rubber contract on the Shanghai Futures Exchange for May delivery fell 280 yuan to finish at 9,960 yuan (US$1,547.47) per tonne.

The front-month rubber contract on Singapore's SICOM exchange for January delivery last traded at 116.5 U.S. cents per kg, down 0.8 cent.