TOCOM rises to 2-month high, following other commodity gains

Benchmark Tokyo rubber futures rose to a nearly 2-month high on Monday, helped by firmer prices of gold and base metals and stronger Shanghai futures.

The Tokyo Commodity Exchange (TOCOM) rubber contract for May delivery finished 3.5 yen, or 2.1% higher at 173.6 yen (US$1.41) per kg, after hitting a high of 174.5 yen, the highest since Oct 15.

The TOCOM futures, which set the tone for tyre rubber prices in Southeast Asia, rose 4.5% last week, booking the biggest increase in three months, on the back of short-covering after a long downtrend amid fears over slow demand in China.

"Higher prices of some commodities such as gold lent a support to investors' sentiment," said Satoru Yoshida, commodity analyst at Rakuten Securities.

Gold held near a three-week high on Monday, boosted by short-covering after strong U.S. nonfarm payrolls data bolstered the case for a Federal Reserve rate hike next week.

London copper climbed on Monday, as a weaker dollar forced a heavily short market to cover.

The most-active rubber contract on the Shanghai futures exchange for May delivery also rose 250 yuan to finish at 10,465 yuan (US$1,633.09) per tonne.

On the downside, crude oil dipped further on Monday, after OPEC failed to agree on output targets to reduce a glut that has cut prices by more than 60% since June 2014.

Despite the positive tone in the rubber market, analysts are sceptical of the TOCOM market's ability to continue its rally.

"I expect that 180 yen will be a ceiling, as an oversupply issue in the global rubber market remains unchanged," Yoshida said.

The front-month rubber contract on Singapore's SICOM exchange for January delivery last traded at 118.3 U.S. cents per kg, up 1.6 cent.