Rubber retreated from the highest level in more than seven months on concern that U.S. budget talks were deteriorating and as gains in the Japanese currency reduced demand for yen-based contracts.
Rubber for delivery in May lost as much as 2 percent to 282 yen a kilogram ($3,348 a metric ton) on the Tokyo Commodity Exchange, before trading at 283.3 yen at 12:38 a.m. local time. The most-active contract settled at 287.7 yen yesterday, the highest price at close since May 10. Futures have gained 7.7 percent this year.
House Speaker John Boehner’s budget proposal would put “too big a burden on the middle class” and President Barack Obama would veto it, according to White House Communications Director Dan Pfeiffer. Failure to reach a compromise would trigger next month more than $600 billion in spending cuts and tax increases, the so-called fiscal cliff.
“The fiscal cliff negotiation is now in trouble, and that has made the market sentiment bearish,” said Naohiro Niimura, a partner at research company Market Risk Advisory in Tokyo.
The yen strengthened against all of its 16 major counterparts on the U.S. budget impasse and as the Bank of Japan ends a two-day meeting today, at which it is expected to expand monetary stimulus. Crude oil, used to make synthetic rubber, fell from the highest level in two months.
Rubber for May delivery fell 1.7 percent to 24,845 yuan ($3,989) a ton on the Shanghai Futures Exchange. Thai rubber free-on-board rose 0.5 percent to 96.65 baht ($3.16) a kilogram yesterday, said the Rubber Research Institute of Thailand.
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