Rubber on Edge of Bull Market With Yen Near 102 as China Imports

Rubber was on the cusp of a bull market a month after slumping into bear territory as the yen weakened to the lowest level since October 2008 against the dollar and China boosted imports for restocking.

Rubber for delivery in October advanced as much as 1.8 percent to 299 yen a kilogram (2,942 a metric ton) on the Tokyo Commodity Exchange, a 22 percent gain from this year’s lowest settlement for a most-active contract of 245.2 yen reached April 18. The commodity, which fell into a bear market on April 1, pared gains to settle at 294 yen, fractionally short of a 20 percent gain that would signal its entry into bull territory.

Japan’s currency breached 102 per dollar for the first time in more than four years, making yen-denominated futures more attractive to investors. China imported 35 percent more rubber in April from a year earlier, and 32 percent more in the first four months of 2013. Expanded purchases from the country boosted prices in Thailand, the biggest producer, to a two-month high.

“Rubber futures are the biggest beneficiary from a weakening yen against the dollar among commodities,” said Kazuhiko Saito, chief analyst at broker Fujitomi Co. in Tokyo. “Its physical prices, denominated in Thai baht, remain firm. For gold and oil, a stronger dollar dragged down international prices, limiting gains in futures in Tokyo.”

The yen has depreciated 22 percent in the past six months, the most among 16 major currencies tracked by Bloomberg. It extended losses after Group of Seven finance chiefs indicated they will tolerate a slide in the currency for now as they intensified their focus on Japan’s recovery strategy.

The yen fell as much as 0.5 percent to 102.15 per dollar today after last week declining the most since the period ended April 5.

Central Bank

The Bank of Japan increased monthly bond purchases on April 4 to exceed 7 trillion yen at Governor Haruhiko Kuroda’s first policy meeting in charge, exceeding the 5.2 trillion yen forecast by economists in a Bloomberg News survey, as the bank aims to achieve a 2 percent inflation target in two years.

Policy makers maintained the unprecedented plan at an April 26 meeting and predicted inflation will almost match their target in two years even after a report highlighted deflation’s grip.

China was reported by the official Securities Journal last year to plan to stockpile as much as 200,000 tons of rubber through 2013, including the purchase of 60,000 tons by the end of 2012, at 24,600 yuan ($4,002) a ton.

The amount is almost double the volume China bought for reserves previously. The State Reserve Bureau, a Beijing-based agency in charge of stockpiling strategic commodities, bought 105,000 tons during the financial crisis in 2009.

Shanghai Futures

The contract for September delivery on the Shanghai Futures Exchange lost 1.3 percent to 20,615 yuan a ton.

“Futures had been oversold because of concerns about recession in Europe and slowdown in China’s economic growth,” Takaki Shigemoto, an analyst at research company JSC Corp. in Tokyo, said by phone. “China is actually expanding rubber imports to build up stockpiles, buoying cash prices, while futures in Tokyo got an extra boost from the currency market.”

Futures in Tokyo will move higher as the market is still undervalued compared with Thai prices, said Hideshi Matsunaga, an analyst at broker ACE Koeki Co. in Tokyo.

Thai rubber free-on-board rose 0.2 percent to 89.30 baht ($3.01) a kilogram on May 9, the highest level since March 12, according to the Rubber Research Institute of Thailand. It was a 13 percent rebound from this year’s low of 79 baht reached on April 19. The nation extended curbs on rubber exports by 60 days to the end of May to boost prices, Deputy Farm Minister Yuttapong Charasathien said April 1.

Before it's here, it's on the Bloomberg Terminal.