TOCOM falls on profit-taking after oil loses ground

Benchmark Tokyo rubber futures fell on Tuesday, surrendering gains from the previous day, as weaker oil prices and a stronger yen prompted investors to take profits.

The Tokyo Commodity Exchange (TOCOM) rubber contract for September delivery <0#2JRU:> finished 3.6 yen, or 2%, lower at 176.9 yen (US$1.56) per kg, giving up its nearly 2% gains from Monday.

Oil prices fell on Tuesday as concerns mounted a rally since January is fizzling out, while analysts forecast another rise to record levels for US crude stockpiles.

The dollar hovered near 113.69 yen struck overnight, its highest since March 16, as investors looked to a speech by Federal Reserve Chair Janet Yellen, due to speak before the Economic Club of New York at 1530 GMT, for clues on the interest rate outlook.

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

Slumping Shanghai futures also added to pressure, dealers said.

The most-active rubber contract on the Shanghai futures exchange for September delivery fell 445 yuan to finish at 11,310 yuan (US$1,737.30) per tonne.

"It's hard to predict where the market is headed, but the upward trend since February may underline firmer demand at end-users such as tyre makers," said Kaname Gokon, strategist at Okato Shoji Co.

The TOCOM futures, which set the tone for tyre rubber prices in Southeast Asia, have gained more than 20% since its February low of 144.5 yen, helped by the dry wintering season and reduced exports by Asian rubber producers.

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.

Asia's top rubber producers are cutting exports by 615,000 tonnes for six months from March in an effort to lift prices that have tumbled amid excess supply to their lowest since the global financial crisis.

The front-month rubber contract on Singapore's SICOM exchange for April delivery last traded at 127.5 US cents per kg, down 3.6 US cent.