TOCOM hits 2-week high amid concerns over El Nino impact

Benchmark Tokyo rubber futures rose to a two-week high on Tuesday as concerns that a crop-damaging El Nino weather pattern may crimp output offset selling pressure due to sliding oil prices and the yen's jump to a 17-month high.

Tokyo Commodity Exchange (TOCOM) futures, which set the tone for tyre rubber prices in Southeast Asia, rose for a third straight session, also driven by a rebound in physical prices in producing countries in Southeast Asia and firmer Shanghai futures prices, dealers said.

The TOCOM rubber contract for September delivery <0#2JRU:> finished 2.4 yen, or 1.3 percent, higher at 180.8 yen ($1.64) per kg. It earlier hit a high of 181.4 yen, the highest since March 23."The TOCOM prices were boosted by rubber's fundamentals and ignored bearish external factors such as the stronger yen and slipping oil prices," said Jiong Gu, analyst at Yutaka Shoji Co.

"Now that the TOCOM benchmark broke the 180 yen ceiling, it is likely to head toward a 190-195 yen range," Gu said.

The yen soared to its highest in 17 months against the dollar as sentiment in stock and commodity markets soured. Oil slipped to a one-month low after a surprise fall in gasoline demand in the United States and doubts whether oil producers can agree an output freeze to dampen a supply glut.

"Some investors are thinking rubber output, like palm oil, may be affected by the unusual weather in Southeast Asia due to El Nino," Gu said.

Forest fires from slash-and-burn agricultural practices in top palm oil producer Indonesia caused a blanket haze across Southeast Asia in the last quarter of 2015, delaying harvesting, while severe dryness linked to El Nino is expected to cut global palm oil output by 2-3 million tonnes in 2016, according to analysts.

The most-active rubber contract on the Shanghai futures exchange for September delivery rose 300 yuan to finish at 11,720 yuan ($1,810.23) per tonne.

The front-month rubber contract on Singapore's SICOM exchange for May delivery last traded at 139.6 U.S. cents per kg, up 3.2 cent.

($1 = 6.4743 Chinese yuan renminbi)

($1 = 110.3800 yen)