TOCOM recovers from 26-month low on weaker yen

Benchmark Tokyo rubber futures ended higher on Tuesday, after hitting a 26-month low earlier in the session, as a weaker yen against the U.S. dollar prompted investors to unwind their short positions, dealers said.

The Tokyo Commodity Exchange (TOCOM) rubber contract for April delivery  finished 0.8 yen higher at 159.3 yen ($1.4) per kg.

The TOCOM futures, which set the tone for rubber prices in Southeast Asia, dived to 156.6 yen, the lowest since Sept. 15, 2016, earlier in the session.

“The yen’s decline against the dollar lent support during the day-time trade to TOCOM rubber as well as other TOCOM-listed commodities,” said Satoru Yoshida, a commodity analyst with Rakuten Securities.

The Japanese yen traded at 113.99 on Tuesday, as the greenback gained 0.1 percent versus the yen. The yen touched a six-week low of 114.20 on Monday.

A weaker yen makes yen-denominated assets more affordable when purchased in other currencies.

“Still, the overall market sentiment is weak amid concerns that tumbling global stock prices may chill consumer spending,” Yoshida said.

Japanese stocks touched a two-week low on Tuesday, with technology firms coming under heavy selling pressure after shares of Apple Inc tumbled.

“Without support from the lower yen, the TOCOM may slide toward the lows of 2016 at below 150 yen,” he said.

TOCOM’s technically specified rubber (TSR) 20 futures contract for May delivery rose 0.4 yen to close at 144.1 yen per kg.

The most-active rubber contract on the Shanghai futures exchange for January delivery rose 60 yuan to finish at 11,225 yuan ($1,613) per tonne.

The front-month rubber contract on Singapore’s SICOM exchange for December delivery last traded at 123.5 U.S. cents per kg, down 0.6 cent.