Benchmark Tokyo rubber futures slid more than 2% to a near two-week low on Tuesday, giving up gains from the previous session, weighed down by lower oil prices and the yen's rise after the Bank of Japan kept monetary policy unchanged at its two-day meeting.
Rubber tends to track overall commodity markets, especially oil. Weaker crude oil encourages the use of synthetic rubber, a petroleum product, and dents the prices of natural rubber.
The Tokyo Commodity Exchange (TOCOM) rubber contract for August delivery <0#2JRU:> finished down 3.9 yen, or 2.3%, at 167.7 yen (US$1.48) per kg, erasing Monday's 1.6% increase.
The benchmark earlier dropped to 166.6 yen, the lowest since March 4.
"Rubber prices were hurt by slumping oil prices and stronger yen, but trade was thin as investors waited for policy decisions by key central banks," said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
Oil prices fell around 2% on Tuesday, extending losses from the previous session as concerns took hold that a six-week recovery may have petered out due to ongoing oversupply.
The dollar edged lower in Asian trade on Tuesday, with the yen getting a lift to 113.01 yen, against 113.93 yen the previous day, after the BOJ kept monetary policy unchanged.
A stronger yen makes yen-denominated assets less affordable when purchased in other currencies.
As expected, the BOJ's policy board agreed to continue its massive asset-buying programme at existing levels, while sounding somewhat more pessimistic about the outlook for exports, industrial output and inflation.
The US Federal Reserve will begin its two-day meeting on Tuesday. The Fed is seen standing pat on interest rates, and could also make clear that future hikes are on its agenda despite concerns about the strength of the global economy, as long as US inflation and jobs continue to strengthen.
"The TOCOM market seems to have no clear direction, but the benchmark is expected to test 164.5–164.6 yen in a short term, a middle point between a February low of 144.5 yen and a March's high of 184.6 yen," Kikukawa said.
The most-active rubber contract on the Shanghai futures exchange for May delivery fell 380 yuan to finish at 11,085 yuan (US$1,703.26) per tonne.
The front-month rubber contract on Singapore's SICOM exchange for April delivery last traded at 121.2 US cents per kg, down 2.9 US cent.
