Currency fears continue to affect rubber trade

Currency fears continue to affect rubber trade

SINGAPORE (Reuter): Traders in Malaysian and Indonesia said worries over the region's unsettled financial markets would keep most major buyers sitting on the sidelines, waiting for prices to come off.

"Traders do not dare to get involved in forward trading for fear of further currency movements this week," a dealer in Indonesia said.

"People are still afraid of the currency factor. It's been too volatile. That's one of the main reasons people are nervous," said a veteran rubber dealer in Singapore.

Malaysian dealers said the uncertainty was compounded by worries over stocks sales by Thailand.

"If Thailand keeps to its word to sell this week, I don't think it would sell all the 100,000 tons at once. It will spread out the sales and sell gradually. This way, the market would not plunge but slide gradually," one trader said.

Some Thai dealers are short of rubber and they may buy back part of the stock, the Malaysian dealers added.

"If not for the (Malaysian) ringgit's fall, the market would have come down a long time ago because some speculators want to sell ahead of Thailand's move," another dealer said.

Dealers in Thailand, the world's biggest producer of natural rubber, said the downside may also be limited by flooding in the southern part of the country, but they concede that currencies and the prospect of Thai stock sales have spooked the market.

"Although the government is yet to reach a decision on the matter, the market is already convinced that it will sell part of its stock," a trader in Hat Yai said.

Thailand's National Rubber Policy Committee said it would decide on Tuesday whether to sell about 100,000 tons in its stockpile.

A government official said some 10,000-20,000 tons of smoked and unsmoked rubber sheets may be released to raise revenue and spare Bangkok from using state budgets to boost the income of rubber smallholders land's decision.

"We don't know whether Thailand will announce it or postpone it again. When it comes to this week, just wait and see," said one trader based in Indonesia.

Buyers are also keeping away and don't want to place any orders over the short-term, dealers said.

"We don't expect much demand in near term, but buyers may gradually crawl back," a Malaysian dealer said. European buying may pick up with the conclusion of the summer holiday season, he added.

Indonesian dealers said that with demand so soft, prices would probably drop further this week.

"I think prices will fall to below 40.00 U.S. cents/lb next week. This is caused by a weaker currency and the tight monetary policy," one said.

Some Indonesian dealers were also busy trying to get rid of stocks by selling rubber for the nearest shipment possible to liquidate their holdings.

"They don't dare to take a risk by being involved in forward shipment," said one trader. Some were offering discounts just to get rid of their stocks, he added.

Indonesian dealers said SIR20 were quoted at 41.00 cents FOB Medan for September shipment, 41.25 cents FOB Palembang, Padang and Surabaya and 40.75 cents FOB Pontianak and Jambi.

Malaysia's benchmark October RSS1 buyer was quoted at 264.50 Malaysian cents a kg at the close of trade last week against 259 cents the previous week.

The Thai benchmark RSS3 for October shipment was indicated around 87.00-88.00 U.S. cents a kg FOB Bangkok. January/February was quoted around 93.00-95.00 cents on the same basis.