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Rubber Climbs to Seven-Month High as U.S. Budget Concerns Ease

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Dec. 18 (Bloomberg) -- Rubber advanced to a seven-month high after President Barack Obama made a new budget offer, raising optimism an agreement may be reached to avert automatic spending cuts and tax increases in the world’s biggest economy.

Rubber for delivery in May gained 0.5 percent to 285.7 yen a kilogram ($3,404 a metric ton) on the Tokyo Commodity Exchange, the highest level for the most-active contract at close since May 10. Futures have climbed 8.5 percent this year.

Obama yesterday made the offer that would raise taxes by $1.2 trillion and cut $1.22 trillion in spending, according to a person familiar with the talks. Obama and House Speaker John Boehner are negotiating to avert more than $600 billion in tax increases and spending cuts set to start in January, known as the fiscal cliff. Asian stocks jumped to a nine-month high and crude oil advanced on signs of progress in the talks.

“Optimism about the U.S. budget deal is supporting the market,” Takaki Shigemoto, an analyst at research company JSC Corp. in Tokyo, said by phone today.

Futures also gained amid speculation that the Bank of Japan may ease its monetary policy further after Shinzo Abe’s Liberal Democratic Party swept to power, Shigemoto said. The Japanese yen traded near its weakest level since April 2011 versus the dollar, raising the appeal of yen-denominated contracts, before the BOJ begins a two-day meeting tomorrow.

Rubber for delivery in May dropped 0.2 percent to close at 25,290 yuan ($4,057) a ton on the Shanghai Futures Exchange. Thai rubber free-on-board rose 0.6 percent to 96.15 baht ($3.14) a kilogram today, according to the Rubber Research Institute of Thailand.

To contact the reporter on this story: Aya Takada in Tokyo at atakada2@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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