TOCOM ends down 2.6% due to strong yen, oil price drop

Benchmark Tokyo rubber futures extended declines to end down 2.6% on Wednesday, taking cues from the drops in the dollar against the yen, oil prices and Japanese equities, dealers said.

Tokyo Commodity Exchange (TOCOM) futures, which set the tone for tyre rubber prices in Southeast Asia, had risen 15.7% over five days to Monday as risk appetite grew with recovering oil prices and easing fears of slowing growth in China.

But the momentum fizzled on Tuesday after disappointing Chinese trade data and sharp gains in the yen against the dollar.

"Technical factors such as the triggering of circuit breaker accounted for about 70% of the recent rapid spike in TOCOM, and the market is expected to drop further amid weak economic indicators in Japan and China," said a source with a Tokyo-based dealer.

Japan's economy contracted less than initially estimated in the final quarter of 2015, data showed on Tuesday, but private consumption remained weak, underscoring the challenges the country faces in restoring growth amid intensifying overseas headwinds.

The Tokyo Commodity Exchange rubber contract for August delivery <0#2JRU:> finished 4.7 yen lower at 172.8 yen per kg on Wednesday, marking a 3.7% decline over two days.

Crude rubber inventories at Japanese ports stood at 13,774 tonnes as of Feb 29, down 5.4% from the last inventory date, data from the Rubber Trade Association of Japan showed.

The US dollar was quoted around 112.47 yen, compared with around 112.99 yen on Tuesday afternoon, as the perennial safe-haven yen logged solid gains with waning risk appetite.

Japan's Nikkei share average closed down 0.8%.

The most-active rubber contract on the Shanghai futures exchange for May delivery fell 310 yuan to finish at 11,350 yuan per tonne.

The front-month rubber contract on Singapore's SICOM exchange for April delivery last traded at 127.50 US cents per kg, down 3.8 US cents.