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 1.7 percent to end at 282.8 yen a kilogram ($3,366 a metric ton) on the Tokyo Commodity Exchange. The most-active contract settled at 287.7 yen yesterday, the highest price at close since May 10. Futures have gained 7.4 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 negotiations are in trouble and that has made 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. The Bank of Japan expanded its asset-purchase program for the third time in four months, and will reconsider its objectives for inflation as incoming Prime Minister Shinzo Abe urges more action to end price declines. Crude oil, used to make synthetic rubber, fell from the highest level in two months.
Rubber for May delivery fell 1.5 percent to close at 24,895 yuan ($3,996) a ton on the Shanghai Futures Exchange. Thai rubber free-on-board remained unchanged at 96.65 baht ($3.16) a kilogram today, according to the Rubber Research Institute of Thailand.