Tokyo rubber futures fell by their daily 10-yen limit on Wednesday, reversing the previous day's gains as profit taking set in. The benchmark rubber contract on Tokyo Commodity Exchange for November delivery fell 10 yen, or 3.6 percent, to 265.0 yen ($2.15) per kg.
The benchmark rose around 2 percent on Tuesday to 275 yen, the highest since June 8, triggering profit taking. "Prices fell due to huge profit taking and also stop-loss selling by investment funds," a dealer said.
TOCOM rubber was also under pressure from oil prices, which pulled back from a 10-month high reached on Monday on supply concerns in Nigeria, the world's eighth-biggest oil exporter.
However, TOCOM prices were not expected to fall sharply again on Thursday as fears of falling supply should provide some support, dealers said. In the physical rubber market, rain pushed up prices and trading was active, as buyers feared prices would go higher, traders said.
"They will rush to buy when prices stop falling as they realise prices won't fall again and they will have to pay more," a trader said. Manufacturers bought Thai RSS3 at $2.21-2.22 per kg while China bought at $2.17-2.18 for August shipment, traders said.
Physical rubber prices were expected to remain firm over the next week as rains hit Thailand, the world's biggest producer, and Malaysia, the third biggest, disrupted tapping. The Thai Meteorological Department said more heavy rain was expected next week, including the south, the country's main rubber growing area.
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