Benchmark TOCOM rubber futures fell to their lowest in nearly two weeks on Monday as the yen soared to an 18-month high versus the dollar and Japanese shares slumped after the Bank of Japan stood pat on policy last week.
The Tokyo Commodity Exchange rubber contract for October delivery fell 3.7 percent to close at 187.50 yen ($1.76) per kg, the lowest since April 19. Several markets in Asia were closed for the Labour Day holiday. Japanese markets will be closed from May 3 to 5.
"With China and Singapore markets closed for holidays, Tokyo prices were affected by a strong yen," said Jiong Gu, an analyst with Yutaka Shoji. "I expect prices to drop to 170 yen in one month due to the strength in the yen. Demand is also not as good as the price shows." A stronger yen makes yen-denominated assets less affordable when purchased in other currencies.
Last week, Tokyo prices had climbed to a nine-month high amid hopes for improved demand from China and on speculation that dry weather across Southeast Asia could reduce rubber output. A stronger yen, however, has cut short the rally. The yen touched a fresh 18-month high against the greenback on Monday after its biggest weekly gain in more than seven years, as traders bet that Tokyo policymakers have limited capacity to stem the yen's gains.
Japanese stock indexes tumbled to a near three-week low. The Nikkei share average ended the day 3.1 percent lower, while the broader Topix declined 3 percent. Elsewhere, rubber inventories in warehouses monitored by the Shanghai Futures Exchange rose 1.5 percent from last Friday, the bourse said on Friday. Vietnam's natural rubber exports this year could drop 12 percent from 2015 to a six-year low at around 1 million tonnes, as part of the country's commitment to curb supplies and help stabilise prices, an industry official said on Thursday.
