Currency volatility casts gloom over Asian rubber market
Currency volatility casts gloom over Asian rubber market
SINGAPORE (Reuters): Political upheaval in Japan and regional currency volatility would cast a gloomy cloud over Southeast Asia's lackluster rubber market this week, regional traders said yesterday.
"Japan's political problems and falling regional currencies remain the focus of the market and will keep rubber prices under downward pressure," one Singapore-based trader said.
The three-way race for the prime minister's office in Tokyo started after Ryutaro Hashimoto's resignation last week and will last until Friday, with many in the market backing former chief cabinet secretary Seiroku Kajiyama.
"I think Kajiyama could bring some confidence back to the Asian markets," another Singapore trader said.
A national holiday in Japan got the Asian rubber market off to a quiet start, following the lead of the currency markets.
The Japanese yen was trading at about 139 to the U.S. dollar at 0845 GMT, with most regional currencies losing ground to the greenback, though mainly in dribs and drabs.
Currency volatility would be the main factor dampening Malaysian rubber prices, dealers said.
Last week, demand from Taiwan and South Korea was offset by the ringgit's strength against the U.S. dollar and in the absence of fresh factors, currencies would continue to exert influence on traders.
"Prices could ease back as the ringgit has been holding steady," a local trader said. "But it will be rangebound."
At the close of last week, the Malaysian Rubber Board quoted August RSS1 buyer at 292.50 Malaysian cents a kg after hitting a high of 295, compared with 289.50 a week earlier.
August SMR20 buyer closed at 254 cents a kg, down three cents for the week.
Indonesian traders meanwhile were keeping a close watch on the rupiah, which would keep them sidelined.
"The situation is not expected to change much this week. The prices will remain at about 27-28 U.S. cents/lb fob Palembang because the traders and buyers are still looking at the political and economic situation which has yet to stabilize," said one Indonesian trader.
Negative influence on rubber prices was also seen from industrial disputes in the U.S. and South Korea.
Hyundai Motor Co has begun a program of lay-offs, sending notices to some 2,700 workers, while General Motors Corp faces a strike at a small-car plant which follows stoppages earlier this year at two other GM plants.
"These strikes unsettle the market and remove any demand at all for fill-in rubber volume which was weak anyway," a Singapore trader said.