Japan rubber futures fall on higher supply expectation, weaker yen curbs downside

Japanese rubber futures fell for a second straight session on Tuesday on expectation of higher supply, though a weaker yen limited the downside.

The Osaka Exchange (OSE) rubber contract for November delivery slipped 0.7 yen, or 0.16%, to close at 424 yen ($2.65) per kg.

The rubber contract on the Shanghai Futures Exchange (SHFE) for September delivery fell 10 yuan, or 0.06%, to 17,590 yuan ($2,597.31) per metric ton.

The most-active July butadiene rubber contract on the SHFE fell 520 yuan, or 3.79%, to 13,185 yuan per ton.

The yen weakened to a low of 160.295, continuing to hover around the 160 level widely seen as a line in the sand for potential official intervention.

A weaker Japanese currency makes yen-denominated assets more affordable to overseas buyers.

Tightness in natural rubber supply is expected to ease as tapping in Thailand, Vietnam, the Ivory Coast and Indonesia is expected to increase, according to a report by CITIC Securities Futures.

Still, due to high temperatures and dry weather, rubber yields are forecast to fall below expectations, keeping prices firm, the report said.

Expectations of a severe El Nino weather pattern could inflict further damage on crops and reduce yields.

Prices of Thailand’s benchmark export-grade smoked rubber sheet (RSS3) and block rubber were down 0.98% and 0.35%, respectively.

Oil prices fell on Tuesday, erasing most of the previous session’s gains, after Iran and Israel said they had halted attacks on each other following an appeal from U.S. President Donald Trump, though both sides warned they could resume hostilities.

The front-month rubber contract on Singapore Exchange’s SICOM platform for July delivery last traded at 225.8 U.S. cents per kg, up 0.3% as of 0700 GMT.