SINGAPORE: Tokyo rubber futures fell more than 2 percent on Thursday and hit their lowest in three weeks, as the yen strengthened against the US dollar and the Nikkei benchmark slipped on end-of-quarter selling.
But tight supply in main producer Thailand and hopes that the Thai government would buy more rubber from farmers to support domestic prices could prop up Tokyo rubber futures, which were set for their biggest quarterly rise since late 2010.
The most active rubber contract on the Tokyo Commodity Exchange, currently September, fell 7.7 yen a kg to end at 329.1 yen, after hitting a low of 327.4 yen, its weakest since March 9.
"The wintering season is happening. Fundamentally, it's still the Thai purchasing programme that is supporting the prices," said Ker Chung Yang, an investment analyst at Phillip Futures in Singapore.
Thailand has started a 15 billion baht intervention programme to push up domestic prices by buying rubber from farmers, although not much has been purchased so far.
Thailand is in the dry wintering season, when farmers in major rubber areas have completely stopped tapping as rubber trees stop producing latex, leading to a sharp fall in supply.
Farmers normally resume tapping in late April, when the dry season ends and supply is expected to get back to normal in May.
In the equity market, the Nikkei fell for a second session on Thursday and slipped further from a one-year high hit earlier this week as investors locked in profits from a meteoric January-March rally that is poised to be its best first-quarter performance in 24 years.
The yen was a shade stronger across the board on Thursday but could come under renewed pressure as buying linked to the end of Japan's financial year is set to peak this week.
The most-active Shanghai rubber contract for May delivery ended at 27,895 yuan a tonne, down from 28,230 yuan at the close on Wednesday.
The front-month April rubber contract on Singapore's SICOM exchange was last traded at 376.50 US cents per kg, down 3 cents.