TOCOM hits near 3-wk high but surrenders gains on yen's jump

Benchmark Tokyo rubber futures hit a near three-week high on Tuesday, helped by an overnight rally in oil prices, but surrendered most of their gains after the yen rose sharply against the dollar and weaker Shanghai futures prompted investors to book profits.

The Tokyo Commodity Exchange (TOCOM) rubber contract for July delivery <0#2JRU:> finished 0.4 yen higher at 155.8 yen (US$1.39) per kg after hitting 157.7 yen, its highest since Feb 4, in early trade. The February contract expired at 144 yen.

"The yen's jump and slumping Shanghai futures hurt market sentiment in late trade," said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

The yen gained broadly as risky assets lost traction and revived demand for the safe-haven currency. The dollar slumped against the yen to 111.90 in late Asian trade, after opening at 112.87.

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

The most-active rubber contract on the Shanghai futures exchange for May delivery dropped 55 yuan to finish at 10,645 yuan per tonne.

On further downside, oil futures fell more than half a dollar given worries rising Iranian output would deepen a global oversupply, offsetting expectations of a drop in US production that had spurred sharp price gains in the previous session.

London copper also slipped from a two-week high hit the session before after China boosted metals imports in January, as traders worried about the sustainability of demand.

"Hopes for tighter supply during the wintering season may have lent support to rubber despite tumbling commodity prices," Kikukawa said.

Rubber is tapped year round but latex output drops during the dry wintering season, when trees shed leaves. Wintering in Thailand and Malaysia lasts from February to April.

The front-month rubber contract on Singapore's SICOM exchange for March delivery last traded at 110.4 US cents per kg, unchanged from the previous session.